The Office for Budgetary Responsibility is a welcome innovation within the UK policymaking framework. Too often governments have manipulated the numbers. The OBR should end such finagling. More important, it should end the fear of such finagling. Greater confidence in the probity of official forecasts is a public good. Yet it is crucial to distinguish probity from correctness. The OBR is honest and competent. How could it be otherwise with my former colleague Robert Chote at its head? But it might still be wrong. Economists just do not know very much.
In the OBR’s November forecasts it further lowered potential output at the start of 2016 by 3.5 per cent. As a result, my colleague Chris Giles has estimated that the level of potential output forecast for 2017 is 18 per cent below that implied by the 1997-2008 trend. This is a huge fall.
Between March and November, the OBR added a cumulative total of 8.8 per cent of gross domestic product to the cyclically adjusted current account deficit between 2011-12 and 2015-16. On these numbers, George Osborne, the chancellor of the exchequer, can no longer achieve his objective of eliminating the cyclically adjusted current deficit by 2014-15. The OBR has been a rod for the chancellor’s back.