Magazine article New Statesman (1996)

This Government Must Strive to Make Its Cuts Accountable

Magazine article New Statesman (1996)

This Government Must Strive to Make Its Cuts Accountable

Article excerpt

When Gordon Brown, guided by Ed Balls, announced just four days after the 1997 election that the Bank of England would become independent, the move appeared to be a masterstroke for New Labour. The Monetary Policy Committee (MPC), which was created to set interest rates, heralded a refreshingly plural era of economic policymaking. The move, however, came back to haunt Mr Brown as prime minister more than a decade later when, in 2008, the hawkish governor of the Bank, Mervyn King, in seeming denial about the looming economic downturn, resisted much-needed cuts to interest rates. In retrospect, the autonomy granted to the Bank brought with it many obstacles to good governance.

And so it may now be with the new Office for Budget Responsibility (OBR), nicknamed the "Office of Budget Irresponsibility" by our economics columnist, David Blanch-flower, a former member of the MPC. We learn that after a turbulent initial period in charge, Alan Budd, the interim head of the OBR, is to step down. The Treasury claims he always intended to do so "in the summer" but the news is as damaging as it is premature, given that having an established chairman is one of the key tests of credible independence. The reason for Sir Alan's departure from a role he had described as "the most exciting challenge of my professional life" remains unclear. But it may be a result of growing unease over the fiscal watchdog's autonomy, or lack thereof.

On 29 June, leaked data from the Treasury suggested there would be up to 1.3 million job losses across the private and public sectors by 2015. The OBR's response was to rush out a statement on 30 June insisting that the predicted losses would be counterbalanced by two million new jobs in the private sector by the end of this parliament--a rate of private-sector employment growth unprecedented in the modern era. …

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