´óÏó´«Ã½

Isn't a forecast just that? I listen to the ´óÏó´«Ã½ weather all the time and they often say it will be a mix of sun, showers, cloud and breezy spells. They cover all the angles so they can be sure they won't be wrong. The OBR is no different and the use of data by Cameron is no worse or better than any previous government

I assume that the members of the OBR are paid their salaries by the government, if so, how can they truely be independent?

I can remember him under Thatcher and I was not impressed at the time - I am still not impressed.

1. He is an economist these are the people who gave us no-regulation.

2. He helped found the MPC who got monetary management so wrong in the last decade and lacked the integrity and or backbone to say so at the time.

3. On the upside he did not go to Harvard or Oxford the vipers nest of bad economic training attended by Mervyn King and Ben Bernanke!

etc. etc.

Old fashioned 1980s economist who believes fundamentally in the Milton Friedman economic philosophy of no-regulation that gave use the bubble and crash. He has been and is far too closely connected with the Treasury and that alone should condemn him.

Should we care what he says - NO.

Would suggest the I Ching Yarrow Stalk Method...should be as reliable and as open to interpretation.
Forecasts will come from figures provided by banks and financial services and we all know how self-serving that data will be and add the political interests in the background and you have another agency to reduce the accountability of any decisions being made...."if we had only known", "we had bad information", "the formula didn't account for", " who could have predicted this new situation", standard stuff in the shuffles of governments to appear what they are not...honest. Seems like a great oppotunity for economists and oracles.

If the goverment realy wants this body to produce independant findings they should listen to ideas from all parties and do what Sir Alan has said alowing the OBR to move out of the Treasuary and select there own staff. It should also report to MPs not the goverment of the day . As someone who thinks this body is a good idea ,I agree with Alistair Darling the idea is good but has been stiffeled (not a party political point I am not a Labour supporter)

It's a bit early to be diving into speculation about the reliability of the OBR.

In response to Gthecelt #1

The fanfare was that the OBR was going to be better than anything that proceeded it. That the Budds of its organisation would be independent of the probable machinations of the Treasury, et. al. - that the history of all 3 "wise heads" were as advisors to Tory organisation from government to think tanks was to be forgotten. These were 3 wonderful individuals, almost saintly in their approach, that would vtell us exactly what will be happening economically so Mr Osborne and the Treasury could take the appropriate fiscal action.

Shame that in the first major outpouring the "wisemen" drasticallty altered their predictions to fit Mr Osbornes "budgetry needs", and their worthy leader is to fly the coup for a luxury appointment in the "world of financial gambling". Not to worry I am sure boy George has another independent "friend/advisor" in his back pocket - I know Sir Fred Goodwin is unemployed at the moment and he certainly has the qualifications to predict the fiscal outcomes (he certainly prepared his pension well in advance).

Isn't it funny how one `Sir Alan' looks much like the next. No wonder the other guy took a peerage.

"Trust me...I'm leaving.." - said Alan Budd as he waltzed out of the door.

Things must be bad if someone who lived through the Thatcher years is now drawing back at the sight of the current situation.

Is this yet another person in a prime position who hasn't actually done a real days work in his life?



Clearly sitting on boards (education, corporate or Government) is not acceptable experience for someone who is supposed to be assessing the Economy.

"An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area."

Considering the vast majority of labour, capital and land resources in this country are not engaged in board meetings then I would suggest that Sir Alan is not experienced enough for this position.

It's time we threw out the soothsayers and replaced them with people who have actually experienced a working life. That way we might get some understanding and empathy and not the baseless fantasy assumptions we currently get.

The conservatives ran on cutting the budget. Now that they are in power they don't seem to have the courage to actually do it. They want someone else to make the cuts and they can blame someone else for doing what they said they were going to do. If it wasn't for cowards there would be no politicians. No one willing to take charge that is why things are the way they are. Tricky to keep taxing the people for the benefit of bankers and get re-elected....will need a new office of independent taxation....I know, the banks already indirectly tax the people, but we need an independent government office now. The elected will just do photo shoots and request studies of the independent offices...hear, hear...

Ad inifitum re the OBR. They are the forecasters not the policy makers. Fact: there will be more unemployed under the ConDems than there would have been under Labour. We can discuss if that's good or bad. Our ire should be aimed at those intent on destroying the public sector not those who've recently rejoined it like Sir Alan!

Is this the sort of 'saving money' the coalition were thinking of?



That's £160 Million wasted by canning this programme - they could have used that money to buy all the kids umbrellas for the wet season (in England that's usually the summer) - so the chalk doesn't wash off their slate boards.

...and there seems to be some confusion in the ranks, when Cameron demanded "get rid of the FSA" - I think he meant the financial services authority and not the food standards agency.


Never mind, I'm sure that's one industry that can 'regulate itself' and we won't be eating chicken injected with water to increase the weight and therefore the cost....because food suppliers are all honest people.

Finally - the same old comedians are still rolling out the same old lines....



Yeah - we'll see Stephen, by my reckoning the break even point and current share prices are:

Bank Current price B.even price
Lloyds 63.89 75
RBS 46.40 50
Northern Rock 0 ????

Well if they make a profit for the Government then I'll eat the equivalent value of that profit in horse manure.

What the poor investment mind of Stephen doesn't realise (maybe he's new at this game) is that when you dump that many shares into the market, a market already 'not keen' on finance - you tend to make the price drop further.

It's called demand and supply - maybe Stephen hasn't got that far in his 'Economics for dummies' book yet.

The only profit we'll ever see from this scam is inflationary profit - where the value of the shares rockets as the value of the pound collapses. A profit in UK terms - but those foreigners won't want out worthless sterling by then and the cost of a loaf of bread will be about £500 anyway.

Every single one of them - FRAUDS.

Good piece - this is an ex-OBR then!
Do you think that Osborne is happy that the reputation of his OBR was trashed for the sake of avoiding one mildly embarrassing PM questions?
We are only a few weeks into a new Govt and we have had the OBR shambles, the school building shambles, and now massive reorganisation and new structure for the NHS that seems to have caught a lot of MPs and commentators (and presumably a lot of the public) by surprise. It is one thing to look accident prone after 13 years but it requires real skill to manage it after a few weeks in office.

Why should the ipinion of one person count more than the views of others? Even citing 'track record' is not a good enough justification. My own personal judgements have been fairly accurate and I'm not an octopus.

If the OBR is to do what it says on the tin, it should be warning us, repeat us, yes us, of the possible obstacles there are to what they may feel is possibly a successful policy. One way they can start is by giving predictions as a range.

The other point is that as no one was giving any figures or policies that had any credibility before the election, even considering what things might have been like under Labour is meaningless. Labour was rightly kicked out, now the coalition have got to prove that they are good, not just 'better than Labour' The OBR should not have anything to do with what Labour might have done - that is being involved in politics and destoys their 'independent' tag straight away.

Unfortunately the OBR, something I applaud as a concept, will not ever be seen as independant after this debacle; it has demonstrated by action that it is prepared to massage figures to fit policy even if that were not the reality of the events. It all looks a little bit grubby and that is what people will now see regardless. It's first major outing should at the least have been frank and honest and published the calculated numbers, however painful to "Call Me Dave" and Boy George, to shopw what independance really looks like, to make a true break from the past. Instead, it just looks like another government mouthpiece, shrouded in pseudo independance, but in reality just a group of puppets (maybe muppets would be better?) to back up the governments policy decisions.

A shame, a real opportunity lost. I can't see the OBR lasting the course, not after this.

There will be more people unemployed as a result of the cuts .This is not something that we should shirk from as we cant get the ecconomy back on track without it . I do not like the idea of people being made redundant , however its something that would have had to happen whichever party was in power if they made cuts . Labour may have put this off and allowed the deficit to get bigger and some people would agree with this, the mess would not go away but

Watch this clip of Budd being rather frank, and read the blurb:



Pity no-one asked him about this today.

Plus ça change?

Lies, Damned Lies, and David Cameron. Next we'll be told that being unemployed is good for you, and that having one's pension pot effectively devalued is life affirming. Who said spin was dead?

Screw it.

As I mentioned before, it's completely irrelevant if the forecasts come from some dependent or independent body. It's just about information flow to the markets, and we all really care about them, don't we?

What they should do is just announce that the UK will no longer supply GDP stats and see what the so-called 'markets' do then. Would rather throw a spanner in the works, eh?

I remember Sir Alan as an absolutely brilliant academic lecturer. I mean, you would remember the message your whole life.
I'm not so sure that he is a forecasting fanatic though.

You have to believe him, he is Sir Alan Budd. Mmmm, hardly a glowing support for his behaviour.

Budd has previously been an econonomic adviser to the Treasury but only under Heath, Thatcher and Major. Its reasonable to infer he is not an impartial civil servant.

There is nothing wrong with this of itself but it means the OBR is no more neutral or independent than most politicians could ever claim to be. However, if Cameron genuinely wanted an independent office that was seen to be impartial, his choice of its leader is clearly inappropriate.

8. At 4:55pm on 13 Jul 2010, stanilic wrote:
Isn't it funny how one `Sir Alan' looks much like the next. No wonder the other guy took a peerage.

At least the real Siralun might do us all a favour and say to Cameron /Clegg

YOU ARE FIRED

The electorate will do that anyway in roughly 12 months.

Boilerbill #14 - but they did - and will continue to do so as all lap dogs, their reputations mean nothing when lucrative boardroom positions await around the corner. Connections, connections, look at John Major who could not workout change when a trainee bus conductor, but ended up being Chancellor, Prime Minister and now on the boardroom a hedge fund. Funny old world!

jim3227 #16 - please explain the mess.

Like the UK government my wife and I took out a substatial debt, that at the time seemed impossible to pay back. However, it was to be paid back over a long period of 25 years (the government have 14 years before their bonds are called in), so we sat down and worked out how we would pay it back. We worked, very hard in the public sector, we managed to pay off the debt, year on year, and there we were "mortgage" paid, no problem.

Can anyone explain why this country has to pay-off a 14 year debt before the next election (Tories hoping) in 5 years; why 25 or 40% cuts in our social services (schools; NHS; councils; support mechanisms of all kinds for businesses and local communities) will not destroy both the economic as well as social fabric of this country? Look at the lauded example of America, walk (no you had better drive with locked doors, and possibly with police escort) through Detroit, Chicago, New Orleans and see the result of the "monetarist dream". Observe the military enlistment offices in the urban slums; the enlistment drives in the schools and colleges of destroyed industrial cities.

This country's debt is 63% of GDP; Germany's 72%; France almost 78%; Italy 115%, so where is the problem? America has an astronomical balance of payments deficit, and going up; in the UK ours is holding steady if not improving. Unemployment is increasing in America and the Eurozone, while before the "slash and burn" of boy George it was relatively small in comparison and stable. Where is the problem with the economy - other than some bankers wanting more; some politicians wanting revenge for sitting in opposition for 13 years, when they expected to return to power under William Hague/Michael Howard. The root of the problem is the malice of a group of unelected (remember the voting public did not give a majority to the Tories, and even walked away from the LibDems) vindictive individuals attempting to turn the social structure of this country back to the 1930s, or earlier. They rely on the lack of voice of those who lived through the last real "great depression", made worse and extended in time due to exactly the same policies being enacted in 2010. Let us not forget the culmination of this period in our history was the Second World War, the survivors of which overthrew their old masters and elected a "government of change" in the real sense, who introduced social well being that has greatly extended the expectations of the vast majority of the population. The NHS; social welfare; later under Wilson the extension of access to higher education (The Open University), all part of the dream of those who went through the "great depression". In 1930 the debt was 174% of GDP; health care was privately organised; university education was for the priviledged few; the majority of the working population had outside toilets (if not communal facilities); schooling for the majority finished at 14; women had only just obtained the right to vote.

Lest we forget where these public school oiks intend taking this nation. That the Churchills and MacMillans were drawn from under 5% of the population, with hereditary connections to landed wealth; MacMillan's Cabinet contained more of his relatives than anyother in history. Close knit environments (like prisons) breed malice and connivance to do ill to those outside of the gang. Likewise restricted devlopment in closed school/university cloisters breed the modern Tory politician (even Mr Pickles has backed away from some of the "young Tory activists"). Dave, boy George and buffoon Boris, moron Gove, are lurking behind "I agree with" Nick and "I told you so" Vince, like school prefects with their fags - bullying a nation that clearly indicated to them all "none of the above" or "we do not want your policies". The convenience of "coalition", the merging of the "desperate want to be" with the "completely incompetent" in a unified chorus of "it would be worse under the others". Let us all make it clear; blog; letter; face to face; at every opportunity, that "OH NO IT WOULD NOT HAVE BEEN"!!!

Oh dear this seems to have turned into a dead duck before it was fully hatched but then again that's what happens when you rush through idea's without thinking them through fully,much like the coalitions policies in other areas really.

Stephanie Flanders.

"In Budd We Trust"

many Rastafarians do.

:-)

24. At 11:21pm on 13 Jul 2010, honestgeraldinho wrote:
"Can anyone explain why this country has to pay-off a 14 year debt before the next election (Tories hoping) in 5 years; why 25 or 40% cuts in our social services (schools; NHS; councils; support mechanisms of all kinds for businesses and local communities) will not destroy both the economic as well as social fabric of this country? Look at the lauded example of America, walk (no you had better drive with locked doors, and possibly with police escort) through Detroit, Chicago, New Orleans and see the result of the "monetarist dream". Observe the military enlistment offices in the urban slums; the enlistment drives in the schools and colleges of destroyed industrial cities."
>>>>>

You are confusing the national debt with the goverment deficit. The government are NOT aiming to pay off our debt (about £700bnish) but reduce the ANNUAL deficit to balance the books. It is reckoned that the structural deficit is approx £60bn ish - ie that is the amount that we cannot afford even if we had a booming economy.

All this means is that by the time the books balance then the national debt will stand at approx £1trillion! (excl. lots of public pension liabilities, PFIs etc) with the massive interest payment associated with it.

It is sensible to do this just to stop us getting deeper in the mire of interest payments (probably £40billion this year and getting bigger!) but there will be a massive impact on the economy and it will be interesting to see Ireland over the next few years given their austeriry programme is already well underway.

A further point - we hear the constant drone concerning unaffordable pensions; that our grandchildren and their children will be paying for ever more. What bit of "baby boom" did the statisticians not understand? Though, as a result of the NHS we are living longer, the expensive bulge of old people is finite. When I am gone, born on the first day of the NHS, along with a large number of others, the pension burden will decrease.

I can remember in the 1980s the slaughter of Teacher Training Colleges (culled like seal pups on the Canadian coast) because the number of births were plummeting. Whoops, wrong again, it was a social tend, with working women delaying their child bearing into their late twenties and thirties, a change in expectation of material security before the career gap of child rearing. However, that did not stop Thatcher and Sir Keith Joseph cutting training numbers; hiding reduced numbers within university departments before eventual closures. Then low and behold, by the mid-1990s the UK is importing teachers from all over the world, to fill the gap created by - you guessed it the curtailment of training in the 1980s.

All "ponzi schemes", as contributory pensions are, rely on new members paying for those about to exit the "scheme". However, it does depend upon all parties not reneging on their responsibilities. What cost "employer pension holidays", non-contribution to contracted funds, taking what in fact is part of the "employees terms of employment". How come there was excess in the "pension pots" that employers used to legalise their non-payment, but nobody could foresee the resultant shortfall? What role was taken by the trustees of these funds, in applying to the judiciary to amend the legal obligation for a convenience?

Sir Alan Budd, "well respected prophet" according to your piece, is of the same ilk as all the soothsayers that have proceeded. Does the OBR gather the data independently of the vast array of governmental facilities? If not as in all things, they are merely applying a subjective view to a possible objective collection of figures. I example when "value added" was made a school target in the annual reporting on educational outcomes, the result was the modest downgrading of the measurement of in-take pupils to facilitate the miraculous "value added" by the same educational experience. Does the OBR, oversee the data gathering, or is it the same vested interest of participants providing the information? If government departments gather the data, then the OBR can only reflect that which the government wants them to, or the office boys back in Whitehall. Why not save millions, even billions, by admitting forecasting is for the unemployable. If these individuals were really good at their supposed function they would be making a "Bill Gates" in the world of private finance. No, just chummies, hooked from near and far to front, a bit like a LibDem in the cupboard, the proposed Tory vision of how it should be, and as it always should have been. Anybody for a bit of forelock tugging?

Thanks to EmKay #27 for you clear explanation of what this government is trying to do.

However, as I understand it the £60bn is/was being used to enhance the country's infrastructure (building new schools, hospitals; training long-term unemployed; facilitating growth in entreprise and community developments). These are not continuing expenditures, as has been demonstrated by Michael Gove, in a trice they can disappear.

I think the Keynesian arguement would be, as with Roosevelt in the 1930s, that you spend more than you are earning so that in the future the subsequent increased earnings pay-off the investment. A bit like buying a house to ameliorate the perpetual payment of rent for the privilege of a home, but to the eventual gain of another. Seeing investment, something the UK has been loathe to do for large swathes of the past 60 years, that improves the productive capabilities of a nation must be the purpose of government. Or do you believe in the Thatcherite (illigal at the time) demonstration of cutting a pound note in half as some demonstration of economic policy?

The Tory vision of "shopkeeper Thatcher" where UK Inc. pays its way through its private sector ignores the huge contribution made to UK income from the public sector. What value to the economy the intellectual contribution of our universities (public sector); developments in health care and treatment of our leading hospitals (public sector)?

In response to the issue of PFI, was it not your darling Tories who introduced this little accountancy nicety, selling their headquarters to fund an election campaign, then leasing itr back? Were not most of their infrastructure developments (few as they were in 19 years) similarly funded. I recall a wonderful initiative to enhance the lives of Liverpudlians, a park along the Mersey, filled with rare trees from around the globe - shame the majority ended up in Michael Heseltines estates when the spotlight moved on.

In your wisdom, please explain how in these times of proposed mass unemployment this frugal Tory government can go with large cheque book in hand to those who as a result of the Equitable Life "ponzi collapse" have constantly demanded money which their policies clearly indicated where not guaranteed. Well now we know they are, by a Tory government willing to destroy what little manufacturing remains in Sheffield in the name of austerity. Whoops, that is where "I agree with" Nick Clegg eminates from, well not for long anyway (what is the suggestion, if 10% of the electorate are unhappy with their elected member they can call for a bi-election)?

An un-elected government, in both Tories with just over 300 seats and the LibDems with a reduced representation, is imposing a spiteful revenge for being rejected for so long (13 years for the Tories, and almost a 100 for the Liberals). Now the reticent Labour voter will realise just what they have done, and by the time they realise the boundaries will have changed, the rules will have changed, and there will never again be an opportunity to "change the government". The "mad monk" Sir Kieth Joseph Foundation of Tory Thinking has spent a very long time working on the re-establishment of the "old values" and here it comes.

Anybody out there not seen the Peter Cook movie "The Rise and Rise of Michael Rimmer? If not, get a copy from Amazon (just £7.99, or £12.99 new) and see just what devious Dave and boy George have planned for our political representation.

The lack of criticism from Mister Budd in respect of Mister Cameron is scandalous. The responsible thing for an Office of Budgetary Responsibility would be to firmly correct misuse of figures. To take the Chancellor or the Prime Minister to task for comparing figures that cannot be compared.

"the number of forecast job losses which are directly attributable to decisions in the Budget - is not 30,000 but 160,000 by 2014-15."

"The paper also makes clear that David Cameron was wrong to say that the coalition's policies would lead to fewer job losses over the next two years than under Labour - he was comparing two very different numbers."

"Sir Alan did not criticise Mr Cameron for doing this at the time and he didn't take the opportunity to do so today."

Sir Alan should have pointed out publically and loudly what the number of job lossess attributed to the budget are likely to be. That is what responsibility is about: taking responsibility for your policies. Cameron needs to stop asking nurses to suggest which services are to be cut. He should take responsibility for his own decisions. The PR whitewashing of mendacity only works for a few weeks. When the electorate really begin to notice the difference between the rhetoric and what is actually happening - such as the schools debacle with Mister Gove - then the issue of responsibility will begin to bite.

When Cameron is wrong to compare hypothetical figures from Labour forecasts with hypothetical figures from OBR forecasts, the only responsible course of action is for the OBR to publically correct him. If he does not want to be humiliated in that way then he will ensure his predictions are right, presented honestly and correctly attributed.

Anything else is irresponsible.

28 and 29 honestg.... Thank you for your posts, interesting and thought provoking.
To get out of the 30's quagmire took a war and huge public investment with our national debt reaching record proportions approaching 250% of our GDP. It was around 175% throughout the 20's and 30's. If public investment worked in the 1940's and 1950's on the back of borrowing then why can't it do the same again?

Just be catching up on the GDP and RPI, CPI etc. Five years of being worse off for everyone as jobs go, no pay rises etc, house price deflation, in summary we probably face a 5% compound reduction in our living standards over four/five years and that's excluding the no doubt increase in our pension contributions. Possibly 20% worse off by the time of the next election? Is that what we voted for?
take a look, it's mostly about Australia but still pertinent.

If Budd tell's the truth - he'll crash the markets - but this is what he must do

UK Infrastructure costs?
'Black holes' here there and everywhere?
Balance of payments deficits
QE ... it hasn't stopped has it?

This is the legacy of the Labour Party - we need to face it and then the way will become clear and the EU and other millstones around our UK necks and the foolishness of total exposure of the UK in global markets and non dom interference ... will be seen for what these really are and the damage inflicted on us by our weak Westminster politicians.

The moment of truth has arrived ... we can stagnate or buzz ... but first we need a another good dose of reality.

Its ridiculous. no one knows the extent of the job losses as no one knows yet how each department will implement them. The departments don't even know the extent of the cuts 25%? 40%? Its finger in the air time. I don't even think its worth spending the money trying to predict it, the margin for uncertainty is huge.

Why has Sir Alan SAID he is stepping down then. Why has he not been pressed on that subject....? Its not because "everything is fine and I'm not needed any more" is it?

How can Sir Alan Budd and the OBR be considered "independant" when for the 9 months before the budget they were all employed in exactly the same roles advising George Osborne and paid for by the tory party, and then at a stroke of the pen they become paid for by the Government - do you think their loyalty changed then? Do you think they arn't aware of what is expected of them? They didnt NEED to be told to bring forward, because they KNEW what they needed to do.

I see Dannt Alexander is now saying that the OBR's independance isnt in question. Yes, it is - I'm questioning it.

#31
If public investment worked in the 1940's and 1950's on the back of borrowing then why can't it do the same again?

A. As long as you don't mind the re-introduction of rationing as well.
=====================
As to the OBR, Orwell was right, and soon we will have the "Ministry of Plenty" and the "Ministry of Peace and Homeland Security" as well. But I have to admire the brass whotsits of a "Ministry of Information" commentator wondering if some other organ of government is truly independent, and writing satirical articles about the trustworthiness of the opinions of HMG's selected mouthpieces.

It seems someone does read these fora after all :)

# 33. At 08:09am on 14 Jul 2010, nautonier wrote:

If Budd tell's the truth - he'll crash the markets - but this is what he must do

A. And if the major political parties had told the truth, nobody would have voted for any of them...but the show must go on, eh?

Quite JR (@35). Osborne's Budgetary Reinforcements might have been more honest. Mr Alexander might just have well have said,"We have every confidence in the independence of the OBR." and given it the traditional kiss of death.

"1. At 3:25pm on 13 Jul 2010, Gthecelt wrote:

Isn't a forecast just that? I listen to the ´óÏó´«Ã½ weather all the time and they often say it will be a mix of sun, showers, cloud and breezy spells. They cover all the angles so they can be sure they won't be wrong. The OBR is no different and the use of data by Cameron is no worse or better than any previous government"

Forecasts will by nature never be accurate, but the OBR was set up ostensibly to ensure that they are at least unbiased. Yet even the OBR's defenders such as you can only point to the fact that it's no worse than what went before. Wasn't it supposed to be better? What was the point was of creating yet another quango (with heavy emphasis on the "quasi"), when Cameron claims to hate them? It looks like window-dressing, pure and simple; indeed it is almost impossible to come to any other conclusion.

"33. At 08:09am on 14 Jul 2010, nautonier wrote:

If Budd tell's the truth - he'll crash the markets - but this is what he must do"

The markets are of course imperfect, as the last few years demonstrate. However, you don't think they are so stupid as to rely on the Government for economic forecasts, do you? There are forecasters working in the Square Mile!

When are professional economists and politicians going to come clean about their forecasting magic?
Despite years of evidence in different countries by various forecasting agencies and individuals showing that they a generally pretty poor predictors of the future: still the world listens to them. Economics is not a science in the sense of the natural sciences such as physics or chemistry. Like most social sciences it is peppered with mathematical and scientific formulae and equations which try and reduce the human condition to some kind of predictable element. However, many of these models are relatively poor predictors. In natural science, the essence of a good experiment is its consistency of performance; the same applies to well established scientific laws.
Unfortunately, social scientists and economists in particular have persuaded politicians and business people that they can provide similar kinds of scientific predictions. If this were not the case, explain why thousands of millions of dollars are spent each year around the world by governments and businesses paying for forecasts and scenarios.
I do not believe all economic models are rubbish. Clearly there are also laws of economics that pretty robust (simple laws of supply and demand, including the exception for Giffen goods). However, when we move into the world of polical economics with macro-economic fiscal and monetary policies at play, then the game is up. The wide spectrum of professional economists (some with Nobel prizes - although technically there is not a true Nobel prize in Economics - rather a memorial prize to Alfred Nobel) provides ample evidence just how impoverished is the reliability of the various theories at this level.
It is like asking a group of chemists what would happen if chemical X were mixed with chemical Y under a certain set of standard conditions and ending up with about three different predictions. Of course the economy is much more complex that mixing two chemicals.
However, I only wish that economists would have the good grace to be more honest to themselves, politicians and business people as well as the general public about how pathetically poor their predictive models actually are in reality. Of course if they were to do so, an entire industry sub-sector would find itself out of work, which at least supports one economic theory, namely, that if you try and sell something nobody perceives they need, then nobody is likely to buy it.

Stephanie said:-

"However, I only wish that economists would have the good grace to be more honest to themselves, politicians and business people as well as the general public about how pathetically poor their predictive models actually are in reality."

Very true and even more so in the present situation when the state of the economy is so different from what it was over past decades, when the models were being developed. The system is non linear and the changes which took place in 2008 were so large that they must have taken the system way out of the range for which extrapolation has any validity.

It was always going to be difficult for the OBR to maintain its independence and hence its credibility. I notice this morning that the notayesmanseconomics web blog is quoting some implied criticism of it from the Standard and Poors ratings agency when it reaffirmed the UK's AAA rating this week.So it is having a troubled start.

Any thoughts on mentioning the inflation figures Stephanie as they on the CPI measure are still well above target? I also read that on the old RPIX measure that we are double its target at 5%.Surely these are worth a mention...

Stephanie and fellow commentors, fyi.
Sir Alan Budd, to his cohorts at the OBR, once said, "There are three types of economist. Those that can count and those that can't".

For a group that was put in place to stop political games with bugetary forecasts, it seems that the opposite is true and that it was really an act of political spin to rubbish the previous governments forecasts and to save the Chancellor from having to do it. Since the constant mentioning of Sir Alan Budd and the OBR in George Osbourne's budget speech, the veneer of independance of Sir Alan Budd and the OBR has certainly come unstuck.

40. At 09:44am on 14 Jul 2010, Tim wrote:

"33. At 08:09am on 14 Jul 2010, nautonier wrote:

If Budd tell's the truth - he'll crash the markets - but this is what he must do"

The markets are of course imperfect, as the last few years demonstrate. However, you don't think they are so stupid as to rely on the Government for economic forecasts, do you? There are forecasters working in the Square Mile!

>>>>>>>>>>>>>>>>>>>>>>>>

Yes... there are 'forecasters' working in the square mile ... everyone of them a highly paid 'yes man (or woman)' ... and they frequently get /got their forecasts wrong.

The 'forecasters' cannot forecast 'black-holes' - they are not paid or otherwise encouraged or incentivised to do this ...

37. At 09:13am on 14 Jul 2010, PuzzledMushroom wrote:

# 33. At 08:09am on 14 Jul 2010, nautonier wrote:

If Budd tell's the truth - he'll crash the markets - but this is what he must do

A. And if the major political parties had told the truth, nobody would have voted for any of them...but the show must go on, eh?

...............

Yes!

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31. At 06:09am on 14 Jul 2010, Ilkeston_Tim wrote:
28 and 29 honestg.... Thank you for your posts, interesting and thought provoking.
To get out of the 30's quagmire took a war and huge public investment with our national debt reaching record proportions approaching 250% of our GDP. It was around 175% throughout the 20's and 30's. If public investment worked in the 1940's and 1950's on the back of borrowing then why can't it do the same again?

>>>>

The situation is different. The first world was ravaged by war and there were fewer developed economies to compete with. Now we have china, india etc etc which are becoming powerhouses. Japan showed the way how to transform from a cheap n cheerful manufacturer to a premium manufacturer but now these other economies are doing the same and the UK has not progressed quickly enough.

I am afraid that UK politicians (of whatever stripe) have been fiddling while Rome burns for a long time.

What can we do? Unfortunately balancing the books is necessary - remember this does not mean getting rid of the national debt (it will still be over 1 trillion even if the plan does work) but merely not getting further into debt while still paying the 90ish billion interest payment per year (ouch!).

There will be immense pain and hardship for the majority but we've been living in cloud cuckoo land for a long time.

Looks like Stephanie just can't make up her mind...one minute the OBR's figures are plausible....'The plausibility of the changes is not the issue. Nor is this about the integrity of the individuals involved. It's about the difference between "independent" and Independent.'
The next they're not.
One minute Budd and the OBR are independent the next she thinks not.

Budd had a 3 month contract, the OBR as is, was designed to be an interim structure and in its final form it would be accountable to parliament....not a change made as a result of the recent trumped up charges against it.

I note ´óÏó´«Ã½ are promoting Obama's stimulus...despite the fact most of the money was signed over by Bush....3m jobs saved or created?....at a cost of around $300,000 each job....how many of those jobs are actually in China....assuming those jobs were really saved...perhaps Stephanie should investigate Obama's arithmetic.

Why doesn't the ´óÏó´«Ã½ mention this:
Obama's debt commission warns of fiscal 'cancer'
By Dan Balz
Washington Post Staff Writer
Monday, July 12, 2010; A02
BOSTON -- The co-chairmen of President Obama's debt and deficit commission offered an ominous assessment of the nation's fiscal future here Sunday, calling current budgetary trends a cancer "that will destroy the country from within" unless checked by tough action in Washington. "This one is as clear as a bell," he said. "This debt is like a cancer."
The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans -- the whole rest of the discretionary budget is being financed by China and other countries," Simpson said.
"We can't grow our way out of this," Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."

Any views on this Stephanie?

"Bank of England governor's men fiddle with UK forecasts" by By David Blanchflower in the English edition of the Chinese People's Daily

I think Alan Budd said it all some time ago when looking back at his role as Chief Exconomic Adviser to Mrs Thatcher:

"For some economists who were involved in this story there is a further question: were their theories used to disguise political policies that would have otherwise been very difficult [to sell] in Britain?"

"The nightmare I sometimes have about this whole experience runs as follows: I was involved in making a number of proposals which were partly at least adopted by the government and put in play by the government. My worry is as follows; that there may have been people making the actual policy decisions, or people behind them, or people behind them, who never believed for a moment that this was the correct way to bring down inflation. They did however see that this would be a very very good way to raise unemployment.

And raising unemployment was an extremely desirable way of reducing the strength of the working classes; if you like, that what was engineered there - in Marxist terms - was a crisis of capitalism which recreated the reserve army of labour, and has allowed the capitalist to make high profits ever since."

Plus ca change - except the avarice of the libdems, who appear to have been seduced by monetarist punk economics and getting into power.

Alan Budd played a pivotal role in arguing for the deregulation of the financial services industry, the huge cuts in public spending, the dumping of the nationalised industries and letting perfectly good manufacturing companies go down the pan, e.g. Leyland, Upper Clyde Shipbuilders, etc etc.

Budd is personally responsible for providing an alibi for Tory policies: as a leading economist, he offers a veneer of scientific legitimacy which has since been proved to be totally irresponsible, politically motivated claptrap that has left every man, woman & child in the UK owing £40,000 each to bail out the deregulated financial system he advocated, which simply ran amok. Market forces aand self-regulation as a way to control the financial services industry? And we belived this nonsense?

In this case the OBR theory he is now propounding is that the UK can cut large numbers of public employee jobs, make major cuts in public spending and raise taxes to reduce the national debt, BUT at the same time the private sector which has been "crowded out" of the economy by the bloated public sector will then produce millions of new jobs, invest billions in the UK and increase our exports by a third by the end of the parliament.

All this against the backdrop of our main export market being in turmoil in EuroLand where similar austerity programmes are in train, where the Euro has fallen and the Pound has risen so significantly worsening our terms of trade and making our exports uncompetitive.

I beg to disagree with this forecast. All I see is ideologically motivated postering by the Tories and LibDems deluding themselves that they are doing the right thing- I see the PSBR skyrocketing as unemployment spirals out of control, tax take plummets and the welfare bill goes through the roof. By the end of the parilament I see the level of debt GOING UP and siren voiceos on the right calling for even more radical surgery to the state.

Remember - the ONLY justification for the cuts is to reduce the PSBR - if it rises rather than falls, we could end up with the same sequence as the 1980s of a tidal wave of job loses and no prospect of another speculative boom created by deregulation.

Surely it is beholden on the OBR to WARN US of the risk of this happening - indeed, wouldn't this be the ultimate irresponsibility - a huge contraction in GDP and loss of valued public services FOR NO BENEFIT to the British people at all, but the very thing Budd worried about the last time he was in a position to influence things - rightwing Tories using the crisis as a smokescreen to wage class war?

If Alan Budd has a shred of remorse about how his theories were used last time, I'd hope he'd have the decently to stand up and criticise the austerity package when the wheels begin to come off - I'd give it 18 months tops.