By Lucy Phillips
20 May 2010
Labour’s economic record took a battering this week amid allegations of reckless spending decisions and inaccurate growth and borrowing forecasts.
The claims came as the new government prepared to announce £6bn of Whitehall cuts and Chancellor George Osborne established an independent body to produce public finance estimates.
David Laws, the chief secretary to the Treasury, revealed that the previous government had pressed ahead with spending decisions against the advice of its own accounting officers, fuelling arguments that it was profligate in its final months of power. Osborne also suggested that the forecasts produced by the Treasury could have been subject to political interference.
But Rick Muir, a senior research fellow at the Institute for Public Policy Research, said he didn’t expect such revelations to tarnish Labour’s record in the long run because ‘people expect an incoming government to say there are all these skeletons in the cupboard and they left things in a mess’.
He defended most of Labour’s economic performance, backing the fiscal stimulus and bail-out of the banks. ‘That led to government having to borrow a lot of money but things would have been worse if we had let the recession takes its course,’ he told Public Finance.
‘I don’t support the view that the reason we have so much debt is because they were spending public money willy-nilly.’
But he added that Labour should have raised taxes in its third term to keep pace with public spending.
Laws has ordered a review of all spending decisions taken by the Treasury this year. Any government project or pilot scheme that is considered to be a waste of money will be dropped while initiatives deemed worthwhile will have to be resubmitted to the Treasury for budgetary approval.
Osborne said the new Office for Budget Responsibility, headed by Sir Alan Budd, the economist and founding member of the Bank of England’s Monetary Policy Committee, would stop ministers fiddling with fiscal forecasts. Its first task will be to make an assessment of the public finances for an emergency Budget on June 22.
Ahead of this, the new coalition government will outline on May 24 £6bn of Whitehall efficiency savings to be made this year in an early move to tackle the £163bn public deficit. They are likely to include a recruitment freeze, a reduction in the use of external consultants and cuts to IT programmes.
The creation of the OBR was welcomed by the respected Institute for Fiscal Studies, which said it was likely to produce more realistic economic forecasts than the Treasury.
But Colin Talbot, professor of public policy at Manchester Business School, claimed the new body was ‘not credible’.
He told PF that there was the problem of producing a forecast for the coming Budget. ‘The idea that you can conjure up a body out of nowhere to deliver a forecast in 20 or 30 days is just crazy,’ he said.
20 May 2010
Labour’s economic record took a battering this week amid allegations of reckless spending decisions and inaccurate growth and borrowing forecasts.
The claims came as the new government prepared to announce £6bn of Whitehall cuts and Chancellor George Osborne established an independent body to produce public finance estimates.
David Laws, the chief secretary to the Treasury, revealed that the previous government had pressed ahead with spending decisions against the advice of its own accounting officers, fuelling arguments that it was profligate in its final months of power. Osborne also suggested that the forecasts produced by the Treasury could have been subject to political interference.
But Rick Muir, a senior research fellow at the Institute for Public Policy Research, said he didn’t expect such revelations to tarnish Labour’s record in the long run because ‘people expect an incoming government to say there are all these skeletons in the cupboard and they left things in a mess’.
He defended most of Labour’s economic performance, backing the fiscal stimulus and bail-out of the banks. ‘That led to government having to borrow a lot of money but things would have been worse if we had let the recession takes its course,’ he told Public Finance.
‘I don’t support the view that the reason we have so much debt is because they were spending public money willy-nilly.’
But he added that Labour should have raised taxes in its third term to keep pace with public spending.
Laws has ordered a review of all spending decisions taken by the Treasury this year. Any government project or pilot scheme that is considered to be a waste of money will be dropped while initiatives deemed worthwhile will have to be resubmitted to the Treasury for budgetary approval.
Osborne said the new Office for Budget Responsibility, headed by Sir Alan Budd, the economist and founding member of the Bank of England’s Monetary Policy Committee, would stop ministers fiddling with fiscal forecasts. Its first task will be to make an assessment of the public finances for an emergency Budget on June 22.
Ahead of this, the new coalition government will outline on May 24 £6bn of Whitehall efficiency savings to be made this year in an early move to tackle the £163bn public deficit. They are likely to include a recruitment freeze, a reduction in the use of external consultants and cuts to IT programmes.
The creation of the OBR was welcomed by the respected Institute for Fiscal Studies, which said it was likely to produce more realistic economic forecasts than the Treasury.
But Colin Talbot, professor of public policy at Manchester Business School, claimed the new body was ‘not credible’.
He told PF that there was the problem of producing a forecast for the coming Budget. ‘The idea that you can conjure up a body out of nowhere to deliver a forecast in 20 or 30 days is just crazy,’ he said.
