Chancellor Philip Hammond’s planned productivity spending spree won’t have a big effect on the UK’s economy, according to an influential economist.
Robert Chote, the chairman of the Office for Budget Responsibility (OBR), has said Hammond’s plans to boost infrastructure spending did not not have an effect on forecasts.
“This is not the near-term fiscal stimulus package that some people either expected or feared or wanted,” said Chote in testimony to the Treasury select committee.
The chancellor unveiled a £23bn plan in a so-called national productivity investment fund to help improve housebuilding, transport, and research in his Autumn Statement, but the size of the package relative to the UK’s GDP meant that it would have little effect on official forecasts, according to the OBR.
“It’s a relatively small, gradually phased increase,” said Chote, adding that the timing of the measures reduced any possible “multiplier effect”.
Chote was also forced to defend his organisation’s forecasts on the UK’s growth and finances over the next five years. The OBR is mandated by government to produce forecasts twice a year.
MPs from both Labour and the Conservatives grilled Robert Chote on the accuracy of the predictions, announced last week alongside chancellor Philip Hammond’s Autumn Statement.
John Mann, Labour MP for Bassetlaw and a prominent backer of the Leave campaign in the EU referendum, attacked the OBR forecasts on migration’s effect on post-Brexit finances, saying they were "roughly 100 per cent likely to be wrong".
“You’ve created a very big headline that says the economy is going to be badly hit because far fewer people are going to come here because of Brexit… You’ve built in a policy which doesn’t exist,” he said.
Conservative MP Jacob Rees-Mogg also questioned Chote on the accuracy of economists’ models, asking if there is “essentially too much groupthink”.
However, Rees-Mogg, who has been heavily critical of economists and “experts” in the aftermath of the vote to leave the EU, also acknowledged the limitations imposed on the OBR.
“It’s an honest and fairly constructed forecast according to your statutory mandate,” he told Chote.