Think tank calls for ‘honest’ financial forecasts
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The Institute of Fiscal Studies has called for the creation of an independent body to forecast honest public finances.
The body says that by creating a new independent body to forecast the public finances could help keep interest rates at a level at which the government is able to borrow low.
IFS director Robert Chote, speaking at the Scottish Economic Society in Edinburgh last night said the most likely model for the new forecasting body would be one that worked in parallel with the Treasury.
The Conservatives party has proposed to create an Office of Budget Responsibility if it gets into power, and the Government is likely to move at least some way in this direction in its promised Fiscal Responsibility Act.
The IFS also says a cheaper, but perhaps less convincing, option would to make civil servants rather than the Chancellor responsible for Treasury forecasts, as in New Zealand.
Chote says: “If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards.
“If he had taken steps to strengthen the public finances earlier, the UK would have confronted the financial crisis with somewhat lower Government borrowing and debt, and perhaps with the public and investors seeing fiscal promises as more credible.”
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