THE head of the independent budget watchdog has rapped David Cameron for misrepresenting its position on the impact of his austerity measures.
Robert Chote, the chairman of the Office for Budget Responsibility (OBR), wrote to the Prime Minister to dispute claims made in a speech on Thursday.
Mr Cameron said the OBR was “absolutely clear that the deficit- reduction plan is not responsible” for depressed growth – “in fact, quite the opposite”.
But Mr Chote said the OBR believed there was a short-term effect and “fiscal consolidation measures have reduced growth over the past couple of years”.
His retort came in response to Mr Cameron’s claim that there was “no alternative” to the coalition’s strategy.
“There’s not some choice between dealing with our debts and planning for growth,” he said. “As the independent Office for Budget Responsibility has made clear, growth has been depressed by the financial crisis, the problems in the eurozone and a 60 per cent rise in oil prices between August 2010 and April 2011.
“They are absolutely clear that the deficit-reduction plan is not responsible. In fact, quite the opposite.”
But the OBR yesterday published a letter sent to Number Ten by Mr Chote in which he took exception to the claims.
“For the avoidance of doubt, I think it is important to point out that every forecast published by the OBR since the June 2010 Budget has incorporated the widely held assumption that tax increases and spending cuts reduce growth in the short term.”
Using a system of “multipliers” to estimate the impact of particular policies suggested, according to the OBR’s October 2012 report, that “consolidation measures put in place by the previous and current governments would have been sufficient to reduce GDP in 2011-12 by around 1.4 per cent”.
Mr Chote added an impact of “external inflation shocks, deteriorating export markets and financial-sector and eurozone difficulties were more likely explanations” than incorrect multipliers for growth being even weaker that first forecast.
But a Downing Street spokesman said: “The OBR has again highlighted external inflation shocks, the eurozone and financial-sector difficulties as the reasons why their forecasts have come in lower than expected.
“That is precisely the point the Prime Minister was underlining.”
It is the first time the OBR – set up in 2010 by Chancellor George Osborne – has written such a letter to the Prime Minister. An OBR spokesman said Mr Chote had felt it necessary to spell out the position “in case that were in question”.
Downing Street insisted Mr Cameron had not misrepresented the OBR position. It said he had been referring to the reasons growth had been more “depressed” in forecasts which included the impact of austerity.
And it pointed to a similar, unchallenged passage from Mr Osborne’s Autumn Statement.
Mr Osborne told MPs: “One of the advantages of the creation of the OBR is that not only do we get independent forecasts, we also get an independent explanation of why the forecasts are as they are. If, for instance, lower growth was the result of the government’s fiscal policy, they would say so. But they do not.” Although it is the first time Mr Cameron has been written to by the OBR, he has been been rebuked by the Statistics Authority for claiming the coalition was “paying down Britain’s debts.” Its chairman Andrew Dilnot said public-sector net debt had risen.