The Guardian view on the Office for Budget Responsibility: numbers up
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Version 0 of 1. After 58 months of blood, toil, tears and cuts, two months before the election, there are whispers that the austerity chancellor has spotted the funds for a little largesse. The Treasury was yesterday backpedalling from unhelpfully detailed reports about George Osborne weighing specific tax cuts for next week’s budget, fearful no doubt, of spoiling any surprise on the day. The chancellor is also conscious that such a late-in-the-day giveaway could confuse his campaign pose as the man for tough decisions. The question, however, is whether he will be able to resist. For with cheap petrol putting some fuel into the economy’s tank, and falling inflation reducing debt-servicing costs, there is apparent scope for a fiscal loosening of, perhaps, £5bn a year. The Office for Budget Responsibility’s reports may indeed point to such room for manoeuvre, but only because its methods are flawed. It was on the strength of OBR tables that Mr Osborne was able to brag in his autumn statement that “by 2019-20 Britain is now predicted to have a surplus of £23bn”. But as the Institute for Government points out, this “prediction” was no such thing. It was rather an incoherent mish-mash of technical outputs of macroeconomic models, and the chancellor’s own cavalier presumptions about expenditure which nobody – the OBR included – believes. The healthy-looking surplus on the bottom line is swelled by a “planning assumption” that real expenditure per head on fields such as transport, housing and policing can be cut by an average of 57% of the 2010 baseline by the decade’s end, which is to say that such services will be more than chopped in half. How is this to be done? What is it that the state does now that it will stop doing? Nobody can say. The OBR acknowledges this, and pointedly asks whether this renders such vast cuts unrealistic – and yet it continues to build them into the tables. While these wild Treasury assumptions remain unsupported by any Treasury policy, only adherents of the Enron school of accounting should be willing to afford them a line on the ledger. This stuff matters. If Mr Osborne does indeed choose to cut tax this month, he will hold up OBR tables as proof that he can do so without jeopardising that precious surplus a few years down the line. But in truth, by surrendering revenues, he will be locking the state into delivering cuts on an impossible scale, cuts for which the plans simply do not exist. The nonpartisan OBR is, no doubt, nervous about making its own forecasts for something as inherently political as departmental budgets, particularly since these are such tricky things to predict. Tricky, however, is not the same as impossible. If the OBR started out with current expenditure, and then made adjustments for demographics, cost pressures and any explicit changes in policy, that would be far better than allowing Mr Osborne to flatter the arithmetic with “plans” that aren’t worthy of that name, and then – potentially – to use the cooked books to justify tax reductions. Should that happen, the Office for Budget Responsibility would be unwittingly implicated in a deeply irresponsible budget. |