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Growth Forecast

Volume 530: debated on Tuesday 21 June 2011

2. What assessment he has made of the likelihood that the growth outturn will meet or exceed the forecast for 2011 made by the Office for Budget Responsibility in June 2010. (60773)

13. What assessment he has made of the likelihood that the growth outturn will meet or exceed the forecast for 2011 made by the Office for Budget Responsibility in June 2010. (60784)

The Office for Budget Responsibility’s latest economic forecasts were published in March. The whole purpose of creating the OBR was to have forecasts that were independent of the Chancellor, so for me to give a running forecast would completely undermine the institution. To strengthen its independence, I am today announcing the appointment of Lord Burns and Kate Barker as the new non-executive members of the OBR. They were posts that the Treasury Select Committee recommended that we create. I am also announcing today the new appointment of Michael Cohrs as a non-executive director of the Court of the Bank of England, along with the re-appointment of Sir Roger Carr, Lady Susan Rice and Harrison Young—

Well, the hon. Gentleman will like this bit, then. Recognising that we are all going to have to work a little longer, I am announcing the extension of Brendan Barber’s term by a further year.

A year ago at the Dispatch Box, the Chancellor said that, in his judgment, we would have sustained economic growth, even in the face of the cuts agenda that he is pursuing. Does he now believe that the 1.7% economic growth that the OBR has forecast will be met, or will we face a fourth period of downgrading its growth forecasts?

The OBR is a new institution that I think we all agreed should be established and put on a statutory footing. It is independent, and it makes independent forecasts. If the Chancellor of the day started giving a running commentary on those forecasts or making his own forecasts, that would completely undermine the OBR. The institution was introduced in order to give more credible independent information to Parliament. It is interesting that, in the acceptance speech that the former Foreign Secretary would have given if he had become the Labour leader, one of his central points was that Labour should embrace the OBR as an idea that it should have had while in office and that it should support in opposition.

Over the past six months, we have seen the economy flatlining, whereas in the previous six months we saw growth of 1.8%. Can the Chancellor explain to the House exactly what has changed?

I think the hon. Gentleman will find that the Government changed a year ago. I would say to the hon. Lady that the economy is now growing, and that in the past year more than 500,000 private sector jobs net have been created, which the Opposition should welcome. Exports are up 13%, investment is up 5.8% and manufacturing is up 4.2%—[Interruption.] Well, we remember when that lot were in a couple of years ago and the economy was tanking. Now it is growing and, as the public finance figures show today, we are getting the budget deficit down, dealing with our borrowing problem and restoring stability to the British economy. That is why the plans that we have put in place have been welcomed by so many independent organisations.

The Office for Budget Responsibility is scoring the value of most asset sales other than banks at zero in the forecast, on the grounds that it cannot estimate their value. Will the Chancellor provide every assistance possible to the OBR, so that an estimate can be incorporated in its assessment of long-run sustainability, which it is due to publish in three weeks? Is that not an early issue for the newly appointed non-executives to take up?

I am certainly aware that the Treasury Committee and the Office for Budget Responsibility are in discussions over privatisation receipts and other asset sales, but I do not think that it would be right for me to intrude in that discussion. I can give my hon. Friend the commitment that we will certainly provide the OBR with any information it asks for.

Has the Chancellor considered what would happen to our growth rate if we followed the advice of the shadow Chancellor, which is opportunistically to oppose every spending cut and every tax increase proposed by the Government?

Order. There is no requirement or need for the Chancellor to comment on Opposition policy. I would have thought that we had grasped that point by now.

In reaction to this year’s Budget, the Institute for Fiscal Studies said that, if the Chancellor is to meet his borrowing targets, he will be

“now even more dependent on a bounce back in the rate of economic growth from 2013”.

Borrowing has already been £1.5 billion higher in the first two months of this financial year than it was in the same period last year, as the Chancellor’s tax rises and spending cuts kick in. If growth outturns fail to meet the forecasts, will the Government change their plans on borrowing?

When the director of the IFS was asked this month:

“Have things changed so much in the past 12 months that you would expect the Government to change course now?”

he replied, “No”. In fact, the advice of the IMF is also that now would be the wrong time to adjust macro-economic policies, while the Governor of the Bank of England at Mansion house said that we should not adjust the macro-economic mix. The truth is that the Labour Opposition, who got us into this mess, have absolutely no answers for getting us out of it. Is it not striking that the shadow Chancellor gave a speech last week with his big new economic policy, and not a single Labour MP has mentioned it yet?