9 July 2010
The Office for Budget Responsibility made last-minute revisions to its public sector employment forecasts just before the Budget, leading commentators to question its independence.
The OBR claimed that the measures in Chancellor George Osborne’s Budget would result in 490,000 job losses by 2014/15. However, its original figure was 175,000 higher. It arrived at the new figure by assuming that employers would reduce their pension contributions– thereby pre-empting John Hutton’s commission, which will report in September – and that there would be fewer promotions in the public sector.
According to the revised figures, the total job losses by 2014/15 would be only 30,000 higher than Labour’s pre-elections plans would have resulted in. Prime Minister David Cameron told Parliament last week that, based on this projection, there would be fewer job losses in the first two years of a coalition government than there would have been under Labour.
However, the OBR has since said that, because of the assumptions made about pensions and promotions, this would be like ‘comparing apples with oranges’.
This comes in the week that the chair of the commission, Sir Alan Budd, resigned after coming to the end of his three-month contract, which was widely expected to be extended.
Charles Davis, senior economist at the Centre for Economics and Business Research, told Public Finance: ‘The principle behind the office is still right, but it has had a chequered start. What remains essential is that the OBR remains independent from the Treasury.’
He said that the OBR’s forecasts have followed rather than informed the government’s plans ‘to an extent’.
Colin Talbot, professor of public policy and management at Manchester Business School, said on his PF blog: ‘Why government should “outsource” economic and fiscal forecasts to an unproven outfit with no track record, no really independent operation and only a supposedly independent head as a reason to believe in it is a mystery. Why anyone took this seriously, especially the media, is an even bigger mystery.
‘The spin is that Budd always intended to go after three months. If that is the case why didn’t they say so and why didn’t they moderate the impact of his decision to leave by having his replacement already lined up?’
