A group of influential MPs has today told the government’s fiscal watchdog to come up with ways to improve its models after some tweaks in its latest forecast granted Chancellor George Osborne and extra £11.5bn to spend over the next five years.
Nearly every economist expected the Office for Budget Responsibilty (OBR) to reduce the amount Osborne had to spend at the Autumn Statement, but it actually increased it by £27bn. The extra cash allowed Osborne to pull a U-turn on unpopular cuts to tax credits.
On the correction to a VAT forecasting model that gave Osborne an extra £11.5bn to spend, Andrew Tyrie, chair of the Treasure Select Committee, told one OBR official:
Are you concerned about other models you use, Mr [Graham] Parker?
I think we better have a note to the Committee on progress on trying to scrutinise these models and any suggestions you have for trying to sharpen them up a bit.
Because when it's the odd hundred million here are there it's one thing, but when we’re talking about £11.5bn this is very big impact and we’ve got to make sure.
OBR chairman Robert Chote hit back, arguing the OBR did not have the resources.
“Well as you'll recall this was a key conclusion of David Ramsden’s review... which said it would be good to have the resources to do more scrutiny of the models,” he said.
But Tyrie said the one of the issues was that the VAT model was not sufficiently transparent. He said: “So isn’t one of the key issues you’re going to have to look at, before drafting that note we have commissioned, what scope there is for increasing the transparency of the other models in the hope that improve their performance.”