The Office of Budget Responsibility makes running a consistent economic policy extremely difficult. Their numbersĀ change from forecast to forecast with wild swings making it impossibleĀ for the Chancellor to know how much future borrowing is likely to be, how much he needs to do stimulate growth and to curb inflation, and what is likely to be the outcome. I have long been a critic of the fiscal rules which seek to ensure debt is falling as a percentage of GDP by the end of a five year planning period. I argue for proper controls on inflation and borrowing for the immediate year of theĀ budget. Strengthen the inflation target, have a growth target, and have a statement about how much it is appropriate to borrow in the light of debt interest costs.Ā No-one can come up with a reliable forecast of what the borrowing will beĀ five yearsĀ out. The OBR can stop tax cuts by offering an unduly pessimistic forecast of revenues. The Treasury can try to create more scope for tax cuts or spending rises by putting forward an unduly low figure for spending for the fifth year. The Chancellor needs to make good judgements about how much he should borrow , tax and spend in the first year of the forecast when the forecasters have much more opportunity to get the numbers roughly right. Unfortunately the run of estimates this decade have been far from accurate for the immediate year in question, let alone year five.
The latest OBR forecast is a revision for forecasts made as recently as March 2023. The OBR tells us “The combined effects of the historical revisions and latest outturns leaves the level of real GDP at the start of this forecast almost 3% higher than we thought in March”Ā A fall of 1.1% has become a rise. The government had to live with all the bad press for the alleged bad performance, and the MarchĀ budget judgement was on the wrong basis. Their views of inflation have gone the other way. In March they said inflation would be well beaten next yearĀ and into 2026. Now they tell us it will get down to the 2% target a year later and willĀ not go wellĀ below as they said in March. That requires a very different policy response as well.Ā They expect the Bank of England’s base rate to be 100 basis points higher or a quarterĀ up on the rate in the March forecast, and expect longer dated gilt interest rates to be between 100 basis pointsĀ and 150 basis points higher. That has a direct impact on the debt interest charges which on the official method of calculation are large. The higher inflation rate also boosts those account items as they lump the indexation of debt costs which are notĀ items requiring cash payments year by year with normal payments of debt interest which are most certainly annual spending.
The government is rightly concerned to get borrowing under good control andĀ not to add to the real stock of debt going forwards relative to the country’s ability to pay. The OBR have announced that they overstated the deficit and borrowing for just the period from April to October this year by Ā£20 billion, so why should weĀ believe their five year figure and agonise over it? The deficit mistake is based partly on an understatement of the amount of revenue that existing tax rates will yield.Ā They confess that they greatly understated migration numbers which they use to boost GDP as more people taking more jobs boost output. There are arguments over what the public spending impact of that is, and whether it helps GDP per head as well as GDP. Their report does include a summary of the overall errors in GDP forecasting and shows they have got larger in recent years.
It seems likely the tough monetary squeeze which the Bank is administering will help inflation down some more and will continue to slow activity. It is clearly hitting the housing for saleĀ market and will drag on some companies ability to expend where they have high borrowings. The Autumn Statement was right to look for ways to stimulate more investment, to help the self employed and small business, and to look for more ways to help people into work. There will only be a stronger recovery when inflation is down enough to persuade the Bank to relax its squeeze. The BankĀ like the OBR have had major problems with forecasting. They ran far too loose a policy for too longĀ because their forecasts said inflation would stay around 2%. Now they run the risk of doing the opposite and running too tough with forecasts that do not properly reflect the slowdown. The Bank is selling far too many bonds at huge losses, unlike the European Central Bank who made a similar problem by creating too much money and buying too manyĀ bonds to create inflation. At least the Bank is reviewing its models and forecasting. Maybe the OBR should do the same.
The idea of the OBR was to have an independent referee or forecaster who could keep the Treasury honest. It can only work if the referee has sensibleĀ rules and gets its forecasts right. If it persists in getting growth, inflation and deficits very wrong it can generate wrong policy responses and can certainly distort the debate about how the economy is doing.Ā There are always dangers that an independent body formed largely from Treasury officials talking to Treasury officials a lot may not consider other views and other ways of running models that are more accurate. Maybe a truly independent OBR would be bought out by its managers and experts and would be available to offer tailored forecasts for others. IĀ am all in favour of independent forecasts as a means of exploring public policy and as a check on what governments do and say. IĀ worry aboutĀ an independent body owned and paid for by the Treasury that offersĀ fluctuating forecasts that are given so much significance when on some of the key variables they are wrong.
November 26, 2023
The people and the Conservative Party are paying a disproportionately high price for the purblind reliance on false forecast.
But there is nothing that can be done with corporatist state employees who donāt know (because they donāt work at the sharp end, in the City for example) and wonāt learn (because they are personally insulated from the reality of competing daily in the marketplace) and have nothing to defend but their egos.
So what else can we do to insulate the people from the stupidity of the State, which includes the Governing class?
We must replace mortgages with bonds secured on houses. The state borrows over 25 or 30 years, why can the people no do do too? That would iron out this extreme fluctuation and housing market chaos every time the computer model is 30% out over nine months. It would secure an affordable borrowing AMOUNT before the property is bought and before you are committed in place of this ridiculous situation where you have committed and need to re-mortgage the property at 5 yearly intervals or lose it! Madness! Stressful and unnecessary.
No wonder the British people are depressed, sick, and insecure. They are a few months away from losing their biggest asset, generally their only investment and the roof over their heads.
Letās secure their homes. We are told that all these immigrant āhave a human right to a safe homeā. Why donāt we when we enjoy that same right, insulated from the self-created booms and busts of the State?
November 26, 2023
LA, For long term house loans/mortgage market experience look at the USA. They’ve been doing it for years and it’s a mature market, that also has had problems, but I think we can certainly learn some lessons and work out how to bring it into the UK.
Sir J, the OBR only has one customer, are you surprised when it gives the customer what it wants? Your last para offers the solution; turn it into an independent corporate body and let it’s abilities prove it’s worth by offering services to anyone prepared to pay for them. You can do the contract negotiation with the Treasury!
Can the BoE exist without GB Treasury….. NO, therefore, can it go bust…..
November 26, 2023
If the OBR has political motives what do the Tories imagine is going on!! Same for ONS. They add no reliable value. Scrap both the party of the day take responsibility for their own actions. Novel idea but is that what we vote for? Guido has pointed out composition of socialists in each and No.10!
November 27, 2023
JR,
There should be no long discussions after repeated promises and manifesto pledges. Taxation, should now be at all time low, debt being paid down since 2015, small state, border controls, EU laws scrapped, no EJC ruling over our country- like red diesel fine by EU!, left EU totally. Your party failed in every policy regard.
Hunt was a member of the govt when it made repeated claims to balance the structural deficit and pay down the debt by 2015 and many subsequent dates only to be abandoned by Hammond. Hunt now wants us to believe Sunak wants to pay down the debt! When Sunak was chancellor inflation was about 1.7% his reckless actions took inflation to record highs, his reckless actions took money printing and debt to record highs. He recklessly wasted billions to fraud. Hunt and Sunak have taken taxation to record highs. Massive amounts of our taxes given away for others to spend without any condition about UK interests being promoted. The state has massively expanded under them. When Hunt makes specious claims about small state, public spending and taxation so it pays to work we know as a matter of record he is not telling the truth. People paid Ā£1600 per month as an experiment not to work!!
We also know Sunak and Hunt have given away N.Ireland to EU to tie GB to EU laws, courts and regs against the largest vote to provide a mandate to leave the EU. They have done the opposite. Cameron was head of project fear, rigged the referendum with our taxes and now brought back to lead EU policy. Same theme applies to immigration lies.
The false promises, lies and deceit no longer wash. Just get out.
November 28, 2023
Exactly as you say – The false promises, lies and deceit no longer wash. Just get out. Labour will but even worse but so be it.
How are your other four pledges coming on immigration and boats, NHS waiting lists, growth, government debt? Even inflation is still way above target and Sunak as Chancellor caused the 10% + levels with his QE and deluded lockdowns.
The public want to cancel net zero, low quality only immigration, small government, decent public service, low taxes and a bonfire of red tape. You have delivered the complete reverse.
November 26, 2023
My OH bought a beautiful big apartment in France with a mortgage on less than 1%, fixed for the whole payback period. The market has been rising for 3 years and only now levelling off.
November 26, 2023
Stred, how do they organise the mortgages, through a bank, or a building society or the government direct?
November 27, 2023
A bank. CA.
November 26, 2023
The South African Building Societies provide Bonds, over 25 years the fluctuations in interest rates are mostly ironed out. You know exactly how much you are committing to pay each month. There is no housing crisis when interest rates rise.
The most annoying thing is that the British set this whole market up. We also run it – my Aunt was Head of Prooving in the biggest Building Society in SA for 40 years.
The re-mortgaging every 5 years is a chance for the Banks to push more lending – the house is NEVER paid off, our younger generation – Iām speaking of the middle aged now, have no hope of ever paying their house of so donāt even try! This removes one of the main pillars of Capitalism – the ownership of assets!
Letās kick the Banks, the Treasury with its lapdogs the BOE and OBR out of the Housing market.
If not, why not?
November 26, 2023
When I was young it was quite usual for a lad to marry as soon as he had finished his apprenticeship – aged 20 or 21 – and for the couple to move into a house, the deposit for which had been saved for in a building society while they were engaged. This house would be paid off over 25 years and the couple might sell up and buy a seaside bungalow. The next young couple then buy the house with a mortgage over 25 years. Rinse and repeat, as they say.
Which means that, in crude terms, the bank has a mortgage in the property forever. What a racket. Take a house and get people to pay a mortgage on it forever.
November 27, 2023
No thanks Mike; everyone I know likes being mortgage-free at age 60, then if you’re ill you’ve no serious worries, if you need to semi-retire to help out looking after parents or grandchildren, there is no stress, if you have a terrible private pension you can still retire. Lifelong mortgages: you can keep them. I’d not take one for more than 30 years and I wouldn’t re-extend the term if I sold and moved.
November 27, 2023
But those couples are not paying dead money rent, they have the choice to move around, they normally enjoy the appreciation in value, and after the 25 years no longer pay the ‘rent’ or could pass ownership on their death ( until the Tories shafted it with IHT).
November 26, 2023
PW :
“Sir J, the OBR only has one customer, are you surprised when it gives the customer what it wants?”
Very true.
PW :
“Your last para offers the solution; turn it into an independent corporate body and let itās abilities prove itās worth by offering services to anyone prepared to pay for them.”
Or what about creating more than one OBR, perhaps even one not full of fifth columnists, that compete to produce reliable forecasts?
November 26, 2023
The OBR is staffed by EU loving left wingers mostly with no economic experience. It is a jobs for the boys and girls dreamt up by Gideon.
It’s funny how Trus s tax cut were inflationary but Hunts aren’t. Tells you everything really.
November 26, 2023
OBR is just yet another failing public sector body, like the NHS, police, planning, building control, FCA, financial ombudsman service, network rail, NATS, and so on.
The senior executives of these organisations are being paid very well for service that is world trailing.
The whole way accountability works for the public sector needs a rethink.
And the public sector needs to shrink, to be replaced with private sector with proper iterative change incentives .
November 26, 2023
Every month HM Treasury publishes its āForecasts for the UK economy: A comparison of independent forecastsā.
Last one, for November 2023 is No.436 available on assets.publishing.service.gov.uk
Its medium-term forecasts cover tax years up to 2026-27 both from City and non-City providers and include a wealth of parameters: GDP, CPI, RPI, sterling index, unemployment, average earnings, House price inflation, Public Sector Net Borrowing, and a few others.
I would be curious to see the proof from Sir John that the OBR forecasts have ever been outside the standard deviation (the range) of these externally produced forecasts.
If he cannot provide such a proof I will be tempted to think that his reasons for criticising the OBR, BoE, Treasury and the likes have very little to do with āeconomicsā.
Reply I criticise OBR because taxpayers are made to pay for it and Chancellors rely on it. Private sector forecasters have to sell their forecasts. I have made clear I do not believe any spot forecasts for 5 years out as too many things could change. I do scenario planning with ranges for key variables for longer term views.
November 26, 2023
Reply to reply: where do you publish your āscenario planningsā? If you can criticise the OBRās forecasts, wouldnāt it be fair to see how good those of yours are?
Reply I do not do the UK.
November 26, 2023
Hefner, have you compared these organisation and the OBR? Are they all in line with each other? If so why bother having the OBR who get eyes on even more than the independents do, couldnāt we just average the top 3 of the private guestimators and save a lot of money.
November 26, 2023
a-tracy, all these independent forecasts obviously do not agree exactly with each other but they define a āsnakeā usually in rather good agreement for the first year and diverging somewhat (a few %age points) and usually more in later years.
As for saving āa lot of moneyā, I find that a strange argument. The cost of the OBR per se must be rather small as it appears to have less than 50 people (3 āBudget Responsibility Committeeā members, 2 non-executive directors overseeing the Board, 9 economic and fiscal experts, 35 permanent staff).
As I understand it, the cost as discussed on this blog is thought to arise from the so-called deficient OBR forecasts linked later to wrong economic decisions by ministers. However the OBR only provides scrutiny of the performance of the Government in meeting the fiscal rules regarding debt and deficit. The Chancellor is not obliged to accept the OBRās forecasts.
Furthermore the OBR is a non-departmental body accountable to the Chancellor and Parliament, and as a statutory body it would require primary legislation to abolish it.
Finally, before the creation of the OBR, the Treasury was producing its own economic forecasts for budgets and spending reviews. They were considered to be consistently over-optimistic.
The OBR forecasts appear to be pessimistic but less wrong than the past Treasuryās ones.
The latest OBR review by the OECD in 2020 (performed every five years) concluded that the OBR had reduced the bias previously seen and had improved the accuracy of official forecasts.
But as some say āGive a dog a bad name, and drown himā.
instituteforgovernment.org.uk 28/10/2022 āOffice for Budget Responsibilityā.
November 27, 2023
OBR “Our budget is Ā£4.38 million in 2021-22, with indicative funding for two further years in anticipation of the forthcoming Spending Review. This is set out in a letter on 17 June 2021 from HM Treasury Permanent Secretary to Chair of the OBR regarding the OBR funding allocation.” That’s a lot of money to me.
That’s a lot of money for as you say “a few people”, who get their forecasts wrong, over and over and over again.
November 28, 2023
Are you serious a-tracy, Ā£4.38 m / 50 is Ā£87,600 on average. Maybe you should become more aware of what type of salaries this type of people working in public services or in the private sector with equivalent responsibilities actually get.
November 27, 2023
Of course he hasn’t Tracy.
You are right
hefner just wants no criticism to be allowed of the establishment.
The OBR is one new element of the establishment and despite regularly getting their predictions wrong he supports them.
Blindly.
November 27, 2023
Indeed – yet world climate forecasters (which has far more and many totally unknowable inputs like volcanos, wars, populations, sun spotsā¦) actually think they can do 100 years when they struggle to do three days or a week hence accurately.
November 26, 2023
@ Lynn Atkinson “The state borrows over 25 or 30 years, why can the people no do do too?” – people always used to, that being the tenor of a typical home mortage until the last decade or so but at floating rates of interest.
Lenders find it less easy to manage their loan books when granting fixed rate deals of such long duration since traditionally matching deposits are harder to come by (few depositors wish to place funds for 30 years) although now there may some scope for lenders hedging their interest exposure positions in the swap market.
November 26, 2023
Depositors will readily lend to governments for thirty years because credit risk is deemed negligible and because early exit is available through the liquid secondary market in government bonds.
November 26, 2023
So thatās why we need a resurgence of Building Societies where people will readily deposit their money as itās backed by the British Housing Market. Much safer than Gilts!
November 27, 2023
The Bank of England’s promise to repay will always trump a commerical borrower’s (whether in the guise of bank or building society) promise. Accordingly, gilts will enjoy quality and liquidity advantages that investors will value over non-gilts.
November 27, 2023
I donāt.
November 27, 2023
Lynn, I don’t think I’d trust Building Societies again, my family had always saved with The Britannia, as other Building Societies mutualised and gave their members big bonuses (often because they were about to reduce their interest). Britannia savers just lost the interest to virtually nothing when it was sold to the CoOp.
November 28, 2023
There are still a few Building Societies who survived the demutualisation encouraged by the Thatcherās 1986 Building Societies Act. The few that are still around are among the financial institutions offering the best saving rates these last two years.
November 26, 2023
Thank you Mr Redwood for our daily “It’s someone else’s fault, not the Conservative Party’s” column
November 26, 2023
+1
November 26, 2023
I doubt the wider Party, the members and the historic voters feel like that. It is the presiding few encouraged by the fools of the WEF, ECHR, UN that pressure the nonsense via Government. If only the last 13 years had not concluded as it has, else re-election with a better than 86 would be returned. Disaster strikes instead.
November 26, 2023
I think this article lays the blame squarely at the feet of the Tory Government. Did you read it?
November 26, 2023
There is much discussion underway within the EU, NATO and the Ukraine following Putin’s request for terms to end the Ukraine war during his virtual appearance at the G20 last week.
Putin’s request for terms reflects the failure of his “special military operation” – which has resulted in Finland and Sweden joining NATO – and the massive Russian losses, now estimated by the British MoD to be 300,000 men and 2500 tanks.
Here are a reasonable set of terms, given the uprovoked Russian aggression against Ukraine
1) Putin to be removed from office and tried for war crimes at the Hague, followed by democratic elections for a new Russian government
2) Unconditional surrender of all Donbas and Luhansk “separatist” forces in Ukraine territory
3) Russia to commence de-mining of all Ukraine areas affected
4) Russia to pay reparations for all Ukraine loss of life as a result of their invasion
5) Russia to pay the full cost of rebuilding all Ukraine infrastructure damaged by their relentless bombing – hospitals, schools, kintergardens, residential blocks, blood transfusion centres, power stations, air raid shelters etc
6) Russia to release all Ukraine children transported from occupied areas for “adoption” by Russian families
7) The Kerch Bridge to be demolished completely and Crimea to be re-occupied by the Ukraine authorities
Geopolitically there will never be a better time to push Russia east and deal with the Russian threat for a generation.
November 26, 2023
Meanwhile in the real world, SG, Ukraine’s leaders are having to decide what can be salvaged, now they are clearly going to lose the war. Their Western backers are reducing their financial and military support. They can’t sustain a war of attrition with Russia, so what can they hold out for? In my opinion, a neutral Ukraine is still a viable position to settle on. If he didn’t agree to peace on those terms, Putin would look hypocritical in the eyes of non-Western countries, which he seems to care a lot about.
November 26, 2023
On the contrary – Putin is doing the sensible thing to stop the war.
Some in the West have such a perverted view of Russia as always the bad guy, but those who can see through the blather created by our governments know that what the MSM print is far from the truth.
Russia has tried several times to get Ukraine negotiating, but western governments have prevented it. The USA was behind the start of the war and they may lose a lot if Putin achieves everything he needs.
The war will only stop when the idiots in the West stop supplying arms, money and weapons for a lost cause and talk.
November 26, 2023
Putin, that is, Russia needs to be taught that invading neighbours will only result in horrendous casualties and homeland damage, let alone being confirmed as the second worst pariah.
November 26, 2023
Who’s the teacher, Mickey?
November 26, 2023
The invaded asking for help of course.
What did the nations in wars all around the world do?
The invader usually considers they can bully, rape, pillage and steal the land.
Countries with moral standing and fear of themselves becoming targets often step up to help.
Where do you stand? Prefer to lie on your front and be violated?
November 27, 2023
Mickey – What you say is very apt. It’s why so many countries around the world regard the US as the major threat to world peace. After Vietnam, Iraq, Afghanistan, LIbya…
November 26, 2023
Ukraine has been taught that lesson for waging war on the ethnic Russians in Lugansk and Donetsk since 2014.
Not only Ukraine but NATO has been demilitarised. Ukraine is conscripting all (including women) between 17 and 70.
There are 340,000 Russian professional forces on the border that have yet to be deployed. So NATO has been destroyed by a Russian āexpeditionary Forceā.
November 26, 2023
Putin calls invasion a euphemism “On conducting a special military operation”
November 26, 2023
Removed personal attack ed
In the real world, russia cannot be allowed to benefit from its aggression. Allowing it to hold territories taken by force would do that. And they will not stick to any agreement, as we have seen many times. They will use the time to regroup, try to normalise relations so as to build up funds to finance another invasion.
I hope the sorry excuse we have for “leaders” these days has finally learned the above.
If russia wants to exit this war, all it needs to do is retreat to its 1991 borders, as it agreed to in the Budapest Memorandum of 1994. Any discussion over reparations can take place later (if russia wants to normalise relations, it will need to do that).
November 26, 2023
Actually Merkel and Holland have admitted fraudulently guaranteeing the Minsk Agreements so that Ukraine had time to arm.
Then of course there was agreement at Istanbul and Boris Johnson flew to Kiev to force Zelensky to scupper that agreement.
You should get hold of some facts. They are the inverse of what you are reflecting.
November 26, 2023
“Johnson came forward and said when he was on a visit in the spring of 2022: “you must fight to the last Ukrainian”. He came and gave the command to stop negotiations. I’m sure this is not only Johnson’s opinion, but also the Americans’. Not even so much Johnson, but the Americans,” – (Former Ukrainian Prime Minister said
November 26, 2023
– Azarov said this, he is a former Ukrainian Prime Minister.
November 26, 2023
We and the French seem to have stopped supplying weapons to prolong this pointless war. If so, thank goodness for that. We’re coming up to an election year, and the government may now be realising there are things we need to be spending our money on instead. Such as our potholed roads, our dilapidated schools and hospitals, and not least, our own military capability.
November 26, 2023
We have no more. NATO is out of ammo and cannot manufacture it at any sort of pace. We are beaten!
November 26, 2023
Call for the abolition of the OBR or refrain from griping about it
November 26, 2023
Exactly !!
+1
November 26, 2023
Indeed. Osborne was a dire Chancellor, he appointed the appalling Mark Carney, formed the OBR and the dire the office for tax simplification (tax complexity has doubled since), taxed landlords on legitimated business interest (thus hitting tenants and killing supply), promises Ā£1 IHT thresholds, supported Camerons disastrous Libya bombing amd open door immigration and issued blatant lies about the damage to the economy that Brexit would do to try (but failed thank goodness) to swing the referendum. At least they have not dug him up as well as Cameron.
November 26, 2023
Yet. This Zombie Government still, just about, has time to resurrect Gideon.
November 27, 2023
Not yet.
JF
November 26, 2023
If only !
November 26, 2023
Correct. The creation of the OBR and independence of the BoE were political choices that have failed and could easily be reversed but politicians like having someone to blame. Having said that just wait and see how supportive those two will be of the Labour government, suddenly all their forecasts will be rosy.
November 26, 2023
Good morning.
Yeah, yeah, yeah, it’s all the OBR’s fault. But which political party whilst in government created it ?
You made a rod for your own backs.
November 26, 2023
Osborne created it and Cameron, May, Boris, Sunak all failed to close it down. They all failed to keep his IHT Ā£1M promise of 15 years ago too. So who would trust any promises this time?
November 26, 2023
There was a clear need, in the past year, to have someone study the staff composition and hiring practises at the stuffed-with-lefties OBR but this do-nothing government did ………………………………………………………… nothing. The OBR is too big for its boots and, seemingly, has an agenda. It’s time someone started going through the Linkedin profiles of those influencing government policy.
November 26, 2023
No, Sir John, the OBR is the fount of all economic wisdom and is never wrong.
November 26, 2023
The Tories could start the “promised” bonfire of the Quangos with the OBR.
But they haven’t got the guts.
It obviously hasn’t occurred to the LibCONs, but if so many people weren’t employed doing useless jobs in the unproductive Public Sector, we might not have such a problem in recruiting people to work in the productive, private, sector.
November 26, 2023
Donna :
Correct.
Not only applies to the quangos and civil service but even more so the educational sector. We have far too many professors working in the universities all with so much time on their hands that they cause trouble rather than earning a living for themselves and the country.
November 26, 2023
The import thing being, does the Prime Minister or the leaders of the opposition believe the OBR forecasts are correct ?
By default they must, because otherwise they would say and do something, but I hear no criticism of the OBR by any of these people, so I assume they must support that organisation, in which case there is no hope for change.
Sunak has been a Chancellor before being a Prime Minister, and before becoming an MP he was involved in finance in one way or another, but like many who work in finance and give advice, it is not their money they play with, it is always some else’s, and they still get well paid, win, lose, or draw.
The big problem we have is that few of our Mp’s on any side really understand big finance, or have any experience of how to run a commercial business with a huge number of employees.
November 27, 2023
My contention is that STEM-illiteracy is an even greater problem, hence the Gadarene rush to Net Zero.
JF
November 26, 2023
So you are saying the OBR has underestimated the determination of British industry to prevail, despite government’s best efforts to destroy it.
November 26, 2023
@Dave Andrews +1
They have never run a proper business and rely on their poor education, the ability to think and flaky unproven modelling, Created by a failing Chancellor that could see the difference between up and down
November 26, 2023
Time for a big shake-up in how our economy is run — and I don’t mean with the Great Reset
November 26, 2023
@Bryan Harris – Having and creaating an economy would be a good starting place
November 26, 2023
The biggest financial risk in the market at present is the domestic rental market. It is taking so much residual income out of renters’ pockets and thus removing their spending power.
A foreseeable consequence of your government’s war on landlords which sounded good but has screwed over renters to such an extent that your chancellor gave more benefits to housing benefit claimants (again benefits claimants being helped out when the rest of us have to cope.)
November 26, 2023
It’s basic common sense. The responsibility & accountability for economic forecasts should be with the Treasury. Not some public body sponsored by the treasury. How many millions a year is that costing? I could not find any figures! Plus surprisingly this devolution happened under Cameron coalition!
If the Treasury is unable to.produce forecasts on OUR economy. They are certainly unfit for purpose.
The OBR should be cut free from producing any financial forecasts or advise for the Treasury. Which should be totally responsible for this work. But most importantly, the OBR should be fined for their previous incompetence.
November 26, 2023
Jude :
Fined? And who would pay the fines? The taxpayerr of course.
Rather than fined for incorrect forecasts they should be sacked without large payoffs/pensions.
Still, I suppose the ONS would simply cook the books to make the OBR’s figures were made to be correct.
November 26, 2023
I agree with every word of your article ….please act to disband the OBR immediately
November 26, 2023
So the basis on which financial decisions are made is a bucket of worms. Can I suggest that as the world we live in is volotile, stop trying to outguess the unpredictable and only work one year ahead with intentions for year two. That at least allows continuous adjustment as time progresses. Households cannot do much better even if they wished to. As with industry it is good to have a 25 year plan and general phylosophy within which you try to work but you have to learn to duck and dive on the way. Who in the car industry ten years ago could have predicted that government would have sprung from nowhere to ban ICEs by 2030. It is fair to assume that government contains more than its share of idiots, but predicting their form of insanity is another matter.
I would get rid of the OBR and revert to the Chancellor and Treasury taking responsibility for the country’s finnancial affairs, but not before employing some real world economists to run the Treasury.
It is one thing to point out all the mistakes, but what is your plan for doing it with a greater chance of success.
November 26, 2023
agricola : “Who in the car industry ten years ago could have predicted that government would have sprung from nowhere to ban ICEs by 2030.”
A very good point.
The idiocy that is Net Zero makes predicting the future economy impossible as it is decided by politicians making illogical, irrational, economy destroying decisions “to save the planet”.
November 26, 2023
I had hoped you would have something to say about the scandalous failure of your Gov. to get a grip of spiralling out of control immigration. I guess it’s just too embarrassing.
Reply See previous post!
November 26, 2023
I assume you refer to your post of 24th Nov. Which tells us nothing about how your Gov. is going to end this disaster.
November 26, 2023
The government likes to use name and shame as a means of forcing large corporates to do its bidding.
Itās typical of its two faced pathetically weak approach to public sector institutions that it will not do the same.
November 26, 2023
And in other news the government has announced an up to Ā£5 billion investment plan to attract new business and is holding a massive convention to promote it.
Why not reduce corporation tax so they come here naturally rather than have to be bribed?
November 26, 2023
I am not defending the OBR, but by its very nature it can never be right. The OBRās pronouncements are in the same vein(I really wanted to write vain) as IFTTT, as such it should be seen as advice for Government, if this then that and not a media mouthpiece for a personal ego trip of the unelected unaccountable.
November 26, 2023
If you predict that if someone was to walk down the centre of a motorway that they would in all probability get hit by a vehicle. If everyone knows that there is someone walking down the motorway, everyone adjust and a catastrophe is reduced. So if the OBR says if this happens, this could be the result, then because everyone is made aware they mostly adjust to navigate the situation ā so it has a greater probability of not being as predicted.
This then begs the question is the OBR an advisor to Government or is it a media mouthpieces for those that oppose the Government.
Either way the ONR should be abandon, they have now got ahead of themselves, they serve no purpose other than alarmist egoās. Install some AI software in the Treasury and you will get the same output
November 26, 2023
The OBR exists because the Treasury does not have the balanced input to support its decisions ; this doesn’t mean that the OBR is right it merely means that there is another opinion . Forecasting of any sort is entirely dependent on the use of historical data in the hope that events will follow the same course of the past ; nothing is never exactly the same and the result is the present mess. There are few Sir John Redwoods around who have lived long enough and have the capability of his economic judgement ; this is unfortunate especially at a time of poor political leadership and the existence of a BoE that has made so many mistakes . I agree with the view that “change” must now be on the cards ; we need the right people in the right place asap .
November 26, 2023
Is the OBR effectively a civil-service think-tank, swaying Government policy from a privileged position?āOne which is unavailable to any normal think tank.
November 26, 2023
Time to get real āallā this Conservative Governments forecasters have guesswork as the basic theory. If the were half good they could predict the winning numbers for the Lottery each week.
A real prediction is that unless the UK has a priority to create a strong, self reliant and resilient āeconomyā there will be no money to fund all these self-gratification failed promises ALL Political Parties keep making. Thatās not a guess that a logical result on seeing the failure to manage after some 13 years of this Conservative Governments in office, then add in all the numpties in this UK Parliament that chase their egoās and not serving. O many in the UK Parliament believe that they are getting paid to play games rather than do!
November 26, 2023
As predictions go, to day in the Media we have the former Energy Minister(the Energy Minister that helped ensure the UK had no energy) and Chair of the Net Zero Review, Brexit hating remain MP, popping up and predicting the end of the UK(Not the World) for not bowing down to his unproven theories on NetZero
There are 195 Countries in this World only 6 of those Nations have signed up to the Chris Skidmore belief set diktat. That is less than 5% of the world. Will the World change NO, would his unproven belief set destroy the UK YES.
This pretend Conservative believes that while the World, the UKās competitors march on with their stronger more resilient economyās the UK should focus on destroying its own. He demonstrated this Conservative Government along with Parliament is so entrenched in ego and self-gratification so much so they miss the bigger picture. While to him Europe is the World, is his mantra, his leader, his way forward, the World moves forward and prospers because people like him would sooner see the UK destroyed than wake up and smell the coffee.
November 26, 2023
Ian B :
Correct.
November 26, 2023
The latest immigration figures mean that your party will not exist after the next general election.
It’s over.
November 26, 2023
All very well. Mr Redwood has been criticising the OBR for a very long time. It keeps making serious mistakes damaging the economy and political leadership.
But will you go any further than these endless paper pieces?
Will you campaign directly for the abolition of an incompetent organisation?
Of course not, it keeps you busy and safe.
Reply I am campaigning to change it! This is not an academic exercise
November 26, 2023
The OBR was actually created by Osborne as a cunning plan to stop Labour spending wildly. The OBR was supposed to call out the economic situation to prevent Labour spinning their way to overspending to buy votes with taxpayer cash.
As ever, the socialists infiltrated the organisation and turned it against its creators. Why do the “nice guys” on the right never see it coming? A good approach to anything such as legislation or any form of rule-making is to ask yourself
1. “What do people want to achieve that these rules prevent?”.
2. “If I wanted to get around these rules to achieve those things… what would I do?”.
Once you answer that, you can pre-empt the malign actors.
In this case, Osborne should have insisted that the OBR does not contain ex-Treasury officials and is appointed by… whom?
If that can’t be answered satisfactorily, or you realise that there’s no way of making it work, then give up on the idea. From where it is now, you can probably only abolish the OBR (if you can get it past the 600 or so lefties in the HoC and the 800 or so of them in the HoL).
Politics is in a horrible place right now, the lefties have their opponents boxed in at every turn. Losing the likes of Bill Cash will be a blow.
November 26, 2023
P.S. Deflecting the blame won’t work. Everything said about the OBR, BoE etc is true, but the public see that the Tories have done nothing to fight it – and have even accepted it, used it to further non-conservative aims and policies.
Recently, I read a quote regarding the death of political parties saying (paraphrased) “parties are not wiped from existence because of failure, but because of a sense of betrayal”.
It struck me how insightful that is. The Liberal saw an existential threat in 1928 when they went into coalition with Labour. Up to then, they were one of the two main parties, but their traditional voters saw betrayal in their actions and stopped voting for them in froves, never to return. Ever since, the Liberals (and any attempt to merge with other parties such as the latest Lib Dem metamorphosis) have been a bit part player in UK politics.
I feel that the Tories are headed that way now. Voters see not failure, but betrayal – and that is why I don’t see a come-back. There wil be years of pain under Labour and I think we will see a re-formed conservative group which may be Reform UK (pun unintended – it’s not the meaning of “reform” that they intended) or something else. Fragmentation will perhaps be an issue.
However, they will need to be very wary of infiltration, since that is the new political strategy of the left. No places for 90% of former Conservative MPs. The world is seeing what happens (in the form of Russian autocracy and aggression) when you don’t purge the problems of the past – leaving their KGB in place, renamed, and allowing the old politicians of communism to simply re-badge themselves and take power wearing a new rosette was/is always a bad idea.
The next 5-6 years need to be spent thinking about The New Reformation. Trying to pull the wool over voters’ eyes to win the next election is a non-starter from where the current Conservative party is now, I’m afraid. Please give it up, it’s not what’s best for the country in the medium term.
November 26, 2023
XY :
Very good points.
November 27, 2023
XY :
There was much discussion over the weekend over the alleged 4 year job offer, or even money, the Reform Party had made to one Conservative MP to defect to the Reform Party.
The irony is that should the Conservative Party lose heavily at the next GE, 90% of its current MPs will slide effortlessly into the Labour, Lib Dem and Green (Communist) Parties.
November 26, 2023
The OBR does remarkably well given the nonsense of its methodology.
Quoted in the New Statesman’s Will Dunn’s recent article (“Jeremy Hunt’s plan for chaos”) the IFS’s Ben Zaranko says that in the five year forecasts the final four years showing government department spending are just “provisional headline numbers, which nobody really believes” and if the government says such spending will be the same as in year one then “the OBR doesnāt have to score an increase in public services spending”. A classic example of garbage in, garbage out.
November 27, 2023
F57, Given that OBR forecasts are produced by the to-and-fro between the Chancellor (who provides details of any proposed policy changes) and the OBR itself over ten weeks, the question can be asked: Who is the provider of this āgarbage inā?
November 27, 2023
Hold on a minute. Further up this post hefner you said “Finally, before the creation of the OBR, the Treasury was producing its own economic forecasts for budgets and spending reviews. They were considered to be consistently over-optimistic.
The OBR forecasts appear to be pessimistic but less wrong than the past Treasuryās ones.”
So now you’re saying the OBR use Treasury information?
November 28, 2023
The OBR gets information about the projects that the different ministers are planning via the Treasury, in particular details of the Governmentās plans to raise or lower taxes and how and where it intends to spend money.
Why do you think Truss/Kwarteng failed so ābrilliantlyā?
There is a lot of information on how the various bits of the State relate to each other on websites like the gov.uk, parliament.uk, instituteforgovernment.org.uk, ā¦
November 29, 2023
I don’t think it was Truss and Kwarteng’s fault.
So the OBR are responsible for their figures from multiple agencies of state not the Treasury, you can’t have it both ways.
November 26, 2023
Now was it the diabolical OBR/BoE forcasting that brought about the rejection of Ms Truss? The rejection of the emergency budget and her subsequent downfall had a nasty smell about it. And when something smells that bad it is usually rotten. Can it be that both the OBR and the BoE are at the core?
November 26, 2023
John and his like minded colleagues have the ability to save this country from the horrors of a Neo-Marxist Labour party that will complete the job they started in 1997. They should take control of their own party, install a true moral leader and declare war on the poison on the dystopian, woke revolution now being rolled out by the neo-marxist left under Labour and some complicit tories
November 26, 2023
Sir John, while noting how poor OBR targets are, perhaps you could encourage your colleagues to adjust some other targets – those used to determine whether someone can migrate to the UK.
Currently we allow family members to join foreign students without question, a privilege (and expense) not afforded to our own students here or abroad?
And for those migrating for work here, we set the (low) bar in relation to the INCOME of the job offer they have on arrival rather than the estimated net COST to taxpayers of their stay here – the welfare claims for housing and top-up income support, pension and use of our infrastructure.
Both these anomalies are testing the patience and goodwill of long-suffering UK taxpayers, yet daily we hear of your colleagues like Lord Cameron and Kemi Badenoch shelling out huge sums on their pet programmes. NONE of this is affordable any more than it is taking public spending in the right direction, ie DOWN.
November 26, 2023
Got to be said the police have screwed up massively as regards how they are policing these marches.
Its clear biased policing with fear and favour.
Even the ordinary cops know that their supposed leaders have lost the plot completely.
November 27, 2023
Is it just the Metropolitan Police?
November 26, 2023
It seems to me you make an excellent case for the disbanding of the OBR, which any Chancellor worth his salt would have done a long time ago. Unfortunately this would mean that the Chancellor would have to take responsibility himself, which l cannot see happening.
November 26, 2023
I agree that the OBR’s forecasts veer wildly, but always with a result that prevents or cancels supply-side reforms.
I do not think this accidental. Its approach appears to be openly biased.
I see its previous Chairman hs been made Head of the UK Statistics Authority, so we can look forward to OBR-type creative guesswork in every statistical area of the UK.
November 26, 2023
Hi sir John
It makes one wonder if this group of people want the uk in turmoil and to fail all the time
Why aren’t they replace if thy can not do their jobs.
Thank you
November 27, 2023
They themselves don’t regard it as the subversion it actually is. They think that they are merely nudging us back towards the nirvana-on-earth that is EU in their wretched fantasy.
November 27, 2023
I see that the tough-on-immigration Swiss People’s Party won the general election at the weekend. Why is your party so ‘open-borders’ when the rest of Europe is waking-up to the damage caused by immigration from the Third World? Why, Sir John?
November 27, 2023
27th Nov . No post yet today !. Is Sir John OK ?. On the recent news in Holland I wonder what Peter Van Leewen has to say about it ; T he Netherlands may well be the next to exit the EU !.
November 27, 2023
The OBR is governed by an Act of Parliament, The Budget Responsibility and National Audit Act 2011, introduced and passed into law under a Conservative Prime Minister and a Conservative Chancellor.
If there are problems with the assumptions, models etc. that the OBR has been compelled by MPs to use, surely responsibility for those problems lie with those who voted in favour of such (i.e. MPs). It is also, therefore, entirely within the power of MPs to make any adjustments considered necessary.
November 27, 2023
I don’t understand why people run down our Country on the way to attend a Global Investment Summit to try and attract more investment, the Lloyds Banking Group CEO makes us sound desperate.
He told Bloomberg TV: Investment in the UK is actually lower than it has been historically, and given domestically the uncertainty in the economy we have got a relatively lower level of domestic investment at the moment, which is why I think an event like this and a focus on trying to get more investment in business and in the UK is so important.
If your government made things more attractive for homegrown investors we wouldn’t have to go begging other nations who can offshore their profits to please come, we’ll fully expense your investment but allow you to offshore the profit made here, roll up, roll up.
The pound has gained for a third day and was on track for its largest monthly rise against the dollar in a year. – no bit of exciting news is allowed to flourish without two negative comments above and below it.
Sunak said that āinnovation is the golden thread running through the British economyā adding that the UK has āone of the most highly-qualified workforces in Europeā. Really? You wouldn’t know that to listen to the NHS who can’t seem to be able to train British people anymore in London for their own requirements, that we have to import less well trained employees from other nations.
November 27, 2023
The Conservative Party should not tolerate another year being run by careless wasters and idiots.
Replace the current PM and Chancellor with sensible people who have an interest in the UK succeeding.
November 27, 2023
I spent thirty years preparing rolling five year plans and annual budgets.
One thing that was consistent for the five year plan was that it was wrong. It is unrealistic to suggest that the OBR have found a magic formula to accurately forecast the economy in 5 years time when they cannot forecast it accurately 6 months ahead.
I suggest that the Chancellor sticks to budgetting and managing his own income and expenditure with an emphasis in getting his expenditure down to release more funds for activity that will create economic value in the private sector.
The idea that the public sector is an effective value creator is not born out by reality. The participants in the public sector are risk averse and process driven and totally lack enterpeneurial drive and motivation.
November 27, 2023
John,
So what’s the plan?
Another Conservative party leadership contest soon? Where Rishi inevitably comes last?
A General election early next year? Easter at the latest?
Who will we have to vote for that is sensible? The current Conservative and Labour parties certainly don’t offer that.
What are we supposed to do about openly biased multi tier policing? And the Mark Rowley/Sadiq Khan double act breaking every known rule of policing? Are we just supposed to sit by and watch?
Work visas still being printed like confetti for Indian nationals to come in and displace locals from the workforce…
If the democratic process doesn’t find a way to fix this mess quickly the ordinary people are not going to tolerate this for much longer.
This is absolutely the worst ruling class we have ever had, its actively anti British, and anti justice and fair play.
Do something! don’t just play along with this nonsense.
November 28, 2023
I wouldn’t call the election until mid-December; it didn’t trouble people to vote in significant numbers in 2019 mid-Dec. People can get postal votes now.
Prospective candidates new to the area need to be working in their regions, meeting people at all the local events, setting up local information blogs and letting people know how to find the information by handing out business cards with the blog on them and asking them what they’d like the candidate to look into as topics. Many Tories aren’t standing next time, so they’ve lost interest. They shouldn’t stand with a blue rosette if they’re Lib Dems or Labour policy supporters the end.
November 28, 2023
Conservatives will be wiped off the map.
Hopefully a new party replaces them.
November 29, 2023
Batten down the hatches, iain.
The threat of Labour is why people aren’t investing. We’ve had enough problems to deal with this government, the next one is promising a beating for business.
November 29, 2023
The threat of Labour might be the reason why individuals are not investing. Are you so sure it relates to why institutional investors, specially foreign-based, are investing or not?
Are you not afraid of looking at things through the wrong end of the telescope?