The Treasury is interesting since the election hasn’t it? Oh. Just me then? Well, I think it’s been interesting and, frankly, this is my blog so it’s my opinion that counts.
It’s not been interesting because of fiscal policy, monetary process, tax wrangling, or anything, you know, economic or important.
No. It’s been interesting because of the soap opera that George Osborne is overseeing, and the way he handled two key exits .
First there was David Laws. He jumped before he was pushed because of fraudulent expense claims. This was, of course, splashed all over the press. Days of coverage on the rolling news channels and yards of column-inches in the newspapers.
Now it’s Alan Budd. And that’s been very different. It got some media coverage, don’t get me wrong. But not nearly as much as it should have. His departure is much more important than Laws’ was, even if it is less salacious.
That’s because Budd, the chair of the Office of Budget Responsibility, was one of the people at the Treasury with some economic sense. Laws went because he had been dishonest. I would suggest that Budd went because he’s too honest.
The cuts outlined in the Budget and Queen’s speech can’t be justified by economic reasons alone. They’re all about Osborne following through his political ideology to enforce cuts and shrink the state.
Budd said not long ago that
If you [cut] too quickly, then there is a risk that the recovery will be snuffed out and we will go back into a recession — I mean what the Americans say: “Remember 1937.”
Alan Budd knows that’s what is happening. He knows the Tory plan doesn’t make a lot of sense, and that these cuts aren’t going to fix the economy. He can see that the OBR is going from being the Office of Budget Responsibility to Osborne’s Bureau for Rebuttal. So he leaves before he got stuck as chair of a laughing-stock. The current government line that Budd was a temporary chief who was always going to leave now, don’t ring true. If that was the case, surely the Treasury would have lined up his replacement long ago.
So where do the OBR go next? It has no permanent office, no permanent staff, and no permanent role. A lot of people (at least the boring geeky ones who find the Treasury interesting) are questioning the OBR and it’s ability to independently review and scrutinize this government.
The National Audit Office used to have a remit to ‘examine the reasonableness and caution of specific assumptions underpinning projections of the public finances’.
George Osborne changed this so that the NAO had to ‘consider whether key economic and fiscal assumptions underpinning the interim Office for Budget Responsibility’s forecasts were independently arrived at.’
See the difference? It’s quite subtle. Probably too subtle an idea for Osborne to have come up with. It means that the new NAO remit doesn’t include any scrutiny of the OBR forecast itself or any of the specific assumptions that underpin it.
And now Osborne has to find a successor to Budd who is happy to accept forecasts that have never been examined and that fail to convince many economists. That successor, of course, will also have to be happy with the massive ‘austerity’ cuts made by the government. So no Keynesian then.
He would probably find a more willing applicant if he allowed the OBR some independence and also broadened their responsibilities to include proper reviews of fiscal policy, economic growth, and the wider economy.
Oh, and some permanent desks would be nice too.