Robert Chote tells MPs he would not stake his reputation on the Office for Budget Responsibility’s autumn statement predictions
The head of the government’s independent tax and spending watchdog has warned chancellor George Osborne that it would be a mistake to rely on forecasts showing public borrowing coming down this year.
Robert Chote, the director of the Office for Budget Responsibility, said he would not stake his reputation on the predictions his organisation made for last week’s autumn statement.
The chancellor wrongfooted his Labour shadow, Ed Balls, in last week’s Commons exchanges by announcing OBR figures showing that the UK’s budget deficit would fall from £121.4bn to £119.9bn this year once a number of special factors were taken into account. These include receipts from the Bank of England’s quantitative easing programme and future income from the sale of the 4G mobile phone spectrum.
But giving evidence to the Treasury select committee, Chote said: “Putting a lot of weight on a forecast that borrowing is going to fall or indeed rise by £1bn between one year and the next is ignoring the uncertainty.
“The average forecasting error for the budget deficit one year ahead is about £15bn to £16bn, so I think the best conclusion is that borrowing is expected on an underlying basis to be broadly the same this year as it was last year.”
Andy Love, a Labour MP on the committee, said the trend in borrowing had become a political issue, adding that it was important for the government’s reputation that borrowing came down in the 2012-13 financial year.
Chote replied: “Let’s put it this way: I certainly wouldn’t be staking my reputation on a £1bn shift in the budget deficit from one year to the next.”
Borrowing in the first seven months of the financial year has been higher than in the same months of 2011-12, but Osborne expects to raise £4bn from the 4G sale, due to take place in January. An indication of whether the OBR’s autumn statement forecasts were accurate will be available on budget day, which the Treasury announced would take place on Wednesday 20 March.
Chote downplayed the possible consequences of the UK being stripped of its prized AAA credit rating as a result of the OBR’s forecasts of slower growth and higher borrowing in the five years ahead.
“It’s not entirely clear that would be providing any new information to the markets they had not already managed to deduce from the information on which presumably the credit ratings agencies would have drawn their conclusion,” he said. “I think we’ve seen other countries suffer that and it’s not had an obviously noticeable impact on market views.”