Newspaper article The Evening Standard (London, England)

Let's Hope Chote's Crystal Ball Isn't Cracked

Newspaper article The Evening Standard (London, England)

Let's Hope Chote's Crystal Ball Isn't Cracked

Article excerpt

Byline: Russell Lynch ECONOMIC ANALYSIS

THERE can be few public officials with a more thankless job than Robert Chote, head of the Office for Budget Responsibility. When he has the temerity to say that leaving the EU might be bad for the economy, the Treasury's watchdog and official forecaster gets torn apart by Eurosceptics and the pro-Brexit press. And his "forecasting" task is akin to driving blindfold on the M25 because like the rest of us he's got no idea what the Government is going to get from its former partners.

Chancellor Philip Hammond at least didn't add too much to his burden yesterday. "Spreadsheet Phil" put on a stand-up show long on one-liners and short on substantial measures, as expected. But behind Hammond's comedy skit, the OBR's big book had a few lines of its own more likely to provoke tumbleweed than belly laughs.

One joke that's consistently fallen flat since the OBR began life in 2010 is the watchdog's forecasts for productivity growth. We've been less efficient since the crisis, taking more effort to produce the same or less, hitting competitiveness and leaving less scope for pay rises. "Simply put, higher produc-tivity means higher pay," as Hammond put it, while producing a few cheap, reheated gimmicks to tick the box.

The OBR reckons that the UK's productivity growth, which stood at just 1% last year, will almost double to 1.8% by 2020. But the watchdog's heroic assumptions "have been subject to repeated disappointment in previous forecasts", having cut its estimates twice in its last two set-piece statements. Just four months ago, its 2016 forecast was productivity growth of 1.3%. If we get another letdown, it'll have profound implications for the OBR's growth forecasts as well as the Chancellor's public finances.

The OBR's 2017 upgraded growth of 2% in 2017 was widely expected but its downgraded numbers for 2018 and 2019 1.6% and 1.7% respectively are still ahead of consensus, and look rosetinted in some eyes. If that hoped-for recovery in productivity fails to emerge, it smells like a growth downgrade waiting to happen. That will leave Hammond with a black hole in his borrowing figures even before we see what kind of deal we get from the EU. …

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