Senior Tories warn Hunt that OBR errors may hamper UK’s economic recovery
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Jeremy Hunt is being urged by more than 45 Conservative MPs to ensure that “deeply worrying” forecasting errors by the budget watchdog are not hampering Britain’s economic recovery.
In a letter to the Chancellor seen by The Sunday Telegraph, dozens of Tory MPs warn that the Office for Budget Responsibility suffers from “systemic issues” that must be “resolved as a matter of urgency” given the body’s “centrality” to decision-making by ministers.
The MPs, including Dame Priti Patel, Suella Braverman, Sir Simon Clarke and Sir John Redwood, cite a report due to be published next week which will claim that the difference between OBR growth forecasts and the reality has amounted to an aggregate total of £500 billion since 2010.
A report by the Conservative Way Forward Campaign Group is understood to say that even if 2019 and 2020 forecasts are removed from the figures, putting aside discrepancies caused by the unforeseen Covid pandemic, the OBR’s errors would still add up to £138 billion.
The letter marks the most significant coordinated attack on the OBR by Conservative MPs to date, following growing criticism expressed in private and public by backbenchers and ministers in recent years.
The signatories also include Sir Jake Berry and Damien Moore, members of the executive committee of the Conservatives’ Northern Research Group, as well as Sir Jacob Rees-Mogg, the former business secretary, and the ex-Tory leader, Sir Iain Duncan Smith,
The watchdog set up by George Osborne, provides official “scoring” on the impact of policy changes, which it then uses to calculate the overall headroom available to chancellors at financial statements.
Figures are ‘deeply worrying’
Senior Tories have previously warned that it underestimates the potential effect of tax cuts on growth and “scores” migration policies largely on the basis of the benefits the additional labour brings to the economy. Mrs Braverman, the former home secretary, has accused the OBR of largely “ignoring” the costs of higher migration from increased pressure on the NHS, schools and housing market.
The MPs warn: “The country’s success relies upon the OBR getting things right. We would therefore like to draw your attention to a working paper published by the OBR itself earlier this year, entitled The OBR’s Forecast Performance. In the paper the OBR says that since 2010 it has made many miscalculations about the state of the British economy, including a tendency ‘to overestimate real GDP growth and underestimate government borrowing’.
“In a new report, The OBR: A Straitjacket of Failure, the Conservative Way Forward group has calculated that since 2010, the combined total of these errors in growth aggregates to a figure of over £500 billion. Similarly, the OBR’s mistakes in forecasting public sector net borrowing have been wide of reality by over £600 billion in total.”
They add: “These figures are deeply worrying, and sensible economic management cannot continue on this basis. At a time when the British public are having to make every penny count, more must be done to ensure that the OBR’s errors are not holding back the country’s recovery.
“Ahead of the Spring Budget we would encourage you to engage with the findings set out in both the OBR and Conservative Way Forward reports and take steps to remedy the forecasting failings that are highlighted.”
New group forming
It is understood that concerns about the influence of the OBR and other quangos is likely to be a focus of a new group, Popular Conservatism, being formed by Liz Truss, the former prime minister, together with Dame Priti, Sir Jacob and Sir Simon in an attempt to influence the Conservative manifesto with ideas from the Right, including tackling “woke” culture and championing deregulation and tax cuts.
The letter comes after The Sunday Telegraph revealed last month that Rishi Sunak delayed a crackdown on legal migration after voicing fears that the OBR would slash his headroom for tax cuts. Earlier, this newspaper revealed that, shortly before joining the OBR, the body’s head of economic forecasting said that a plan by Jeremy Corbyn to increase borrowing by £250 billion had the potential to “provide a significant boost” to growth.
An OBR spokesman said: “The accuracy of our real GDP forecasts is similar to external forecasters. Both our borrowing and GDP forecasts are more accurate than those previously produced by the Treasury. The OBR is also recognised as one of the most transparent official economic forecasters in the world.”
In 2022 Ms Truss was criticised for failing to ask the OBR to produce a forecast ahead of her ill-fated mini-budget. She later said: “The OBR is one of the props of the current economic consensus, a brake on competitiveness and a barrier to prosperity.
