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Treasury Panel Of Independent Forecasters

Volume 548: debated on Wednesday 14 July 1993

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What benefit they have derived from the advice of the Treasury panel of independent forecasters and to what extent the advice received has been unanimous.

My Lords, the Government give careful consideration to the reports by the panel of independent forecasters in framing their own view of economic prospects. Not surprisingly, panel reports embrace a range of views, though areas of common ground emerge.

My Lords, what a marvellous dollop of bromide that Answer was! Will my noble friend encourage those wise men to ask themselves why our currency has declined over the past 30 years to a point where, measured in terms of the deutschmark, it is worth less than a quarter of what it was previously? Is my noble friend aware of the fact that one of the wise men made reference to the possible need of something much more drastic? It would have been very interesting to know what he had in mind.

My Lords, I am glad that my noble friend was pleased with the very carefully constructed Answer which was intended to be helpful to him. I shall certainly pass on what my noble friend has said to my right honourable friend the Chancellor of the Exchequer.

My Lords, does the Minister agree that the real surprise would have been if seven economists agreed on almost anything? In fact, in the document they agreed on one essential point; namely, that £50 billion of borrowing this year was far too high. Can the Minister clarify the Government's position on that? The Prime Minister has said that 70 per cent. of the borrowing requirement is cyclical —that is to say, it will end when the recession ends, although yesterday the Chief Secretary seemed to dispute that. Therefore, as the Government have always said that they seek to balance the budget over the medium term, will the Minister make clear what their genuine position is now as regards the borrowing requirement and whether they are in favour of one or the other?

My Lords, the noble Lord, Lord Barnett, will know from personal experience what it is like to have forecasters. He will recall the number of times that forecasts were made during his reign as Chief Secretary and the number of times that they were wrong, which gives us all cause for considerable scepticism about forecasts even today. As regards the deficit to which the noble Lord referred, my right honourable friend the Prime Minister qualified the figure that he suggested. He said that it was "about" because one cannot be precise on these matters. That remains the opinion of the Government.

My Lords, has the noble Earl looked at the summary of forecasts which the seven economists have put forward? For example, has he noticed that for next year the highest forecast for the growth of GDP is 3.2 per cent. and the lowest 1.3 per cent., leaving a gap of two-and-a-half times; for the inflation rate 4.8 per cent. against 1.0 per cent., which is 4.8 times; the PSBR is £43 billion against a minimum of £22 billion which is nearly twice the maximum as opposed to the minimum? Can the noble Earl tell us what "careful consideration" means when it comes to looking at those figures? Would not the Government be better off if they got some entrails and looked at them? It would at least be cheaper compared with the cost of these people.

My Lords, the noble Lord will know only too well as an economist himself that people have different views on various matters. Consideration was given to all views. What is more important than the forecast is the result. I am sure that the whole House will welcome the fact that inflation has come down.

My Lords, reverting to the question asked by the noble Lord, Lord Barnett, was there not a remark made about 65 years ago —although I defer to the noble Lord, Lord Skidelsky, on this—that whenever seven economists are gathered together there will be at least eight opinions and two of them will belong to Maynard Keynes?

My Lords, indeed. I believe that many will be surprised that there are as few as eight opinions.

My Lords, is not the appointment of this panel a clever Treasury ploy in order to take the heat off the Treasury for having made so many fatal forecasts in the past? Is it not likely that the economists themselves will make equally unenviable forecasts and thus restore the Treasury to the position which in its own view it has always held; namely, that it is always right under all circumstances?

My Lords, the House will recall that the setting up of the panel was one of a number of measures which my right honourable friend the then Chancellor of the Exchequer outlined in his Mansion House speech last year, including the monthly monetary report, the inflation report of the Bank of England, in addition to the work of the panel. It was to give greater information and transparency than before the panel was set up.

My Lords, can the Minister tell us whether the forecasts would have been more or less accurate if they had been based on unemployment figures calculated according to the method prevalent in 1979? If the Minister does not know, will he make it his business to find out?

My Lords, I am grateful to the noble Earl for giving me advance notice of that question. I have found out the answer. The answer is that it would not have made any difference.

My Lords, in the memoirs of a former Chancellor of the Exchequer—

My Lords, might not my noble friend consider using the services of a tea-leaf reader among some of his forecasters?

My Lords, I wonder whether my noble friend, who probably has experience of these matters, would like to introduce me to a specialist, and then perhaps I could put the matter in more detail to my right honourable friend the Chancellor of the Exchequer.

My Lords, is the Minister aware that in his memoirs a former Chancellor of the Exchequer referred to the quality of the advice received from his economic forecasters, and said that if one asked them for a telephone number they would give an estimate? Does the Minister believe that the quality of advice has changed since the days of my noble friend Lord Healey?

My Lords, those of us who have been lucky enough to have served in the Treasury and to have received forecasts know that officials do the very best that they can.

My Lords, do the Government still believe in market forces? If they do, why do they need a panel of forecasters?

My Lords, the reason is the one that I gave a moment ago to the noble Lord, Lord Annan; namely, that it is a matter of greater transparency. It is clear from the views of the panel, together with those of the Treasury, the range at which one is looking.

My Lords, will my noble friend be kind enough to convey to his right honourable friend the notion that the suspicion is dawning among the people of this country, who are really rather slow to come to terms with harsh facts, particularly when very clever men are involved, that the Treasury is usually wrong and the time is coming when they themselves should do something about it?

My Lords, my noble friend will be aware that there is a world of difference between a forecast and hard facts. A forecast is a projection as to the future; a hard fact is that inflation came down last month, something which I am sure my noble friend will welcome.