Treasury select committee member Andy Love believes the independence of the Office of Budget Responsibility could be called into question if it continues to issue “optimistic” forecasts.
The OBR has revised down its annual forecast for UK growth in 2011 from 2.1 per cent to 1.7 per cent. It then expects growth of 2.5 per cent next year, rising to 2.9 per cent in 2013, 2.9 per cent in 2014 and 2.8 per in 2015.
But at a TSC evidence session on the Budget last week, Barclays Capital chief UK economist Simon Hayes told MPs his pessimistic forecast was for growth of about 1 per cent for the next couple of years, before climbing to 1.5 per cent.
National Institute of Economic and Social Research director of macroeconomic research and forecasting Ray Barrell said “Our forecast for growth after this year and next is half a point lower than the OBR’s. It is very hard for me to understand how it gets such strong growth in the medium term given the fiscal position and what is going to happen with monetary policy.”
Labour MP for Edmonton Andy Love said although the OBR’s growth forecasts for this year have come down, they seem to be optimistic for the future.
He said: “The issue of whether the OBR is being over-optimistic and whether it will eventually be accused of coming under too much influence from the Treasury will undoubtedly come up in future. The reason for setting up the OBR was its independence. Unless it resists that tendency to be over-optimistic, then it may well find itself in some difficulty.”