The budget aftermath is the usual time to unearth hidden nasty measures and expose the Chancellor of the day’s sleight of hand. But it should also be a moment to step back and consider whether the public are being well served in what they are being told about the fiscal future of the country over the next few years. It’s fair to say that things aren’t working as well as they might.
The current set-up is defined by jumpy fiscal forecasts produced by the independent Office of Budget Responsibility on the one hand and an inflexible fiscal rule selected by the Chancellor which states that a surplus must be achieved in 2019–2020 and thereafter (subject to growth surpassing 1 percent). Put these two things together and something has to give. That something, it turns out, is a sensible trajectory for the future path of public spending and tax revenues. As others have highlighted, all sorts of fiscal shenanigans are being contrived in order that HMT can report that it is still on course to reach a surplus in four years’ time.
The result is that the public is too often presented with a set of spending and revenue projections (and implied policy decisions) as if they are going to occur when in reality that is very unlikely. Do you think that the Chancellor is going to — contrary to all recent history — undertake an incredibly painful bout of fiscal tightening in the immediate run up to the next election? No, neither do I. Another revision will turn up, the numbers will be shuffled, the pain will be smoothed over.
This state of affairs leads to various conclusions and suggestions — some silly, some potentially interesting. Put into the former category those who argue or imply that the OBR is bad at its job or makes ‘politically convenient’ adjustments in order to help dig the Chancellor out of fiscal holes. It does a difficult job as well as can be expected. It’s not flawless, of course, but the idea that it is trying to support one party over another is risible. The OBR is not the problem.
Sure, there is a legitimate debate to be had about exactly the sort of government commitments that the OBR should be willing to include in its projections and where it draws the line (presently unfunded manifesto commitments don’t count, totally unspecified future cuts arising from ‘efficiently savings’ do). But it should be remembered that the OBR’s fundamental purpose is to provide transparency: to shine a bright light on what the government says it plans to do, not to ask whether it really means it. That is an important distinction.
There is also a substantive debate that needs to be had about how a Chancellor should react to these twice yearly shifts in the forecast in terms of adjusting his or her fiscal plans. Regular revisions to future plans are not the friend of sensible policy planning: they can create havoc in Whitehall. Against this, it wouldn’t be easy for a Chancellor to ignore repeated changes in the fiscal outlook for the sake of policy stability for too long.
A different type of issue concerns how all this fiscal uncertainty is communicated to the public. It’s important to stress that some journalists do this really well — the Chancellor’s plans are reported alongside the recent pattern of revisions; the likelihood of further changes is put up in neon lights. (Here’s a good example). But plenty of other reporting falls short and risks leaving the public with a false impression.
We’ve now had four significant swerves in the future path of public spending over the last 18 months. Yet each new set of numbers is too often reported as if they were carved on a tablet of stone; as if they are the new reality which we are inevitably heading down the track towards. They’re not. They are momentary numbers that emerge after the OBR makes its best guess as to what will happen to productivity, growth and wages (like everyone else, it doesn’t know); and after the government moves money between years in all manner of ways to meet an arbitrary surplus target some years in the future.
It’s not like this is all cloaked by the OBR. The winks offered by Robert Chote aren’t all that subtle. The OBR’s summary document yesterday was admirably clear about all the uncertainties — you wouldn’t have to be the most discerning of readers to conclude that it was inviting others to raise serious questions about what had just been announced. The OBR’s ‘roller-coaster’ metaphor, deployed last March to describe the future path of spending wasn’t only a useful way of dramatizing the hills and valleys of the fiscal trajectory that the Chancellor had set out. It was also, I suspect, there to invite others to ask: ‘are they really going to do something quite this odd?’ Next time let’s hope a few more take the bait.
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