While I’m deeply unconvinced that chancellors really have been leaning on Treasury civil servants to come up with more convenient figures, the idea of an arm’s-length body to do this sort of thing – economic forecasts, public finance outlook and so on – sounds pretty reasonable. The numbers may not be any more accurate, but they’ll probably inspire a bit more confidence.
Here are a couple of concerns:
First, because the OBR will be both official and impartial (like a cross between the National Audit Office and the Institute for Fiscal Studies), there’s a risk that it will be seen as a sort of Ministry of Truth, making oracular pronouncements that are swallowed uncritically. I really don’t like the mildly Orwellian-sounding name, implying that it is by definition responsible.
Second, and relatedly, it absolutely must not be a body that says what should or should not be done, even in vague terms (‘bring the deficit down faster’), because decisions on tax rates and public spending are inherently political, not technocratic. The OBR must only be advisory, producing forecasts and evaluating policies against politically given objectives. It will be failing us if it endorses, rather than merely accepts as a given, the chancellor’s fiscal targets.
The Treasury press release seems reassuring on this point:
The OBR will make an independent assessment of the public finances and the economy … The Chancellor will retain responsibility for fiscal policy and will set the fiscal mandate, his target for fiscal policy.
Although of course in practice, Osborne will hope to use OBR assessments as political cover for spending cuts. I expect he’ll act as though its judgements are moral decrees rather than technical advice, and in doing so he’ll try to present his own ideological agenda as apolitical good sense. I hope the OBR won’t be flattered into colluding in this. We’ll have to see how it goes.
But another thing the OBR could usefully do is to transform the way we debate fiscal policy. It might allow us to discuss tax, spending and borrowing more like adults than idealistic-yet-cynical children who long for certainty (even as we scorn any attempt to provide it).
The OBR’s numbers will only have credibility (well, with me, at least) if they’re explicit about uncertainty and the inevitable margin of error in forecasting. OK, a politician might well get skewered for being honest about uncertainty (‘you mean you don’t know?’), but the likes of Alan Budd, the seasoned economist and mandarin who’ll be running the OBR, should be able to handle this.
Look at the Bank of England’s marvellous fan chart projections – literally a picture of uncertainty. The media might prefer clearer figures, but they do often seem to accept this approach and some even make the effort to explain margins of error. The Bank has not only changed the way monetary policy has been made, but also changed the way it’s been communicated. The OBR could help us come to accept uncertainty about tax, spending and borrowing as well.
Again, I’m encouraged. Budd says that he is “not claiming that we shall get the fiscal forecasts right; it is easy to demonstrate that that is impossible. Above all, we shall be emphasising the risks and uncertainties”. And the OBR’s remit will be to “present a range of outcomes around its forecasts to demonstrate the degree of uncertainty” and “confirm whether the Government’s policy is consistent with a better than 50 per cent chance of achieving the forward looking fiscal mandate”.
Will it work out well? I don’t know.