How should the nation spend its windfall – the “OBR incompetence bonus”?

The 3 members of the OBR budgetary responsibility committee, by their incompetence, have bequeathed the nation a windfall. The question surely, in which case, is how should we spend it? Restore EMA? Or the future jobs fund? Yesterday they told us we couldn’t afford to. Well today we can.

The ONS published today the level of public borrowing for the current tax year 2010/11. The OBR’s prediction was that by January, the government should be borrowing £4bn less than they did last year. Today, the figures have come out as £14bn. In fact, January was the first month since June 2008 when the government didn’t borrow.

The source of this error is the underestimation of the rise in tax receipts from the recovering economy.  This is rising at 8.4% versus the OBR’s prediction of 6.7%. Now, what’s 1.7% amongst economists?  After all, Mervyn King is running inflation 3% above his mandated rate.

However, this 1.7% is at £10bn. And that is quite a lot of money. As everyone knows, we’re facing an epidemic of youth unemployment, and restarting the future job’s fund would only cost £1bn. Re-instating educational maintenance allowance would be £1bn. And £7bn is what the government is cutting out of the welfare budget.

In fact, these errors, small as they are in economics terms, are having enormous effects on our economy and our future.

Never mind that there wasn’t a single economist that predicted the global economic crash. Forget that this is the worst global financial crisis since the 1930s, put together with the largest globally co-ordinated government fiscal and monetary intervention. How making any predictions of how the economy would perform in this backdrop wasn’t going to end up like putting be the tail on the donkey speaks volumes of the hubris of the economics profession.

The OBR’s task was always going to be difficult, but its way-off prediction of fiscal disaster has allowed this government to imperil the economic success of our future generation.

The OBR committee are their intellectual stool pigeons.


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6 Responses to “How should the nation spend its windfall – the “OBR incompetence bonus”?”

  1. Left Is Forward says:

    The sensible cut would be to ABOLISH THE OBR NOW!!!

    Since the OBR was only invented to support the Tories’ fictitious “cuts are necessary” agenda, and the lies and spin (or incompetence if you want to be kind to them) of the OBR has revealed this for the charade it is, there is no purpose for it any more.

    The truth is we never needed to make cuts. The UK has a top credit rating, so could always borrow money. It has the capacity, being outside the Euro, to partake in quantitative easing, and hence “print” money. It could also raise money by taxing the undertaxed rich, or just by making sure that the wealthy and the multinational corporations paid all their due tax, by clamping down on tax avoidance. ALL of these options were available, and any one of them would have been sufficient to cancel the ideological Tory plans to devastate our welfare state.

    Since the OBR has been proven to be economically useless and just the cover for an illegal government’s cuts agenda, let’s cut it instead! “Restore EMA? Or the future jobs fund?” Both, and let’s rebuild them on the OBR’s corpse!

  2. Frederick James says:

    I feel your pain.

  3. william says:

    Left is forward,go and ask your bank manager about giving you an unlimited unsecured bank overdraft.

  4. So you want to waste the money the country is saving instead of using it to pay off our debts. You are acting like a family who wins some money on the lottery and spends it on a nice 50″ LCD TV rather than on minimising debts with bankruptcy and reposession just around the corner.

  5. Taffarel says:

    Labour you never seem to learn.

    You just can’t help blowing money we dont have. Its like an endless ATM without a care in the world as to the debt you racked up and the near bankruptcy you caused this once great nation.

    If the deficit becomes smaller, we are still spending money we dont have. Can’t you work this out???

    If you want an economist who predicted the crises, youtube Peter Schiff’s 2006 ‘Mortage Bankers Speech’.

    If you want growth then cutting corporate taxes for small to medium business’ is the only way of increasing employment. We need to move away from the bloated public sector, crony financial capitalism and debt based system that your lot created.

    We need to re-invigorate the private sector, the only wealth creating asect.

    If you want to understand the damage of debt and deficits read Reinhart and Rogoff; ‘This Time is Different : Eight Centuries of Financial Folly’.

    Am sure your lot will be in the second edition.

  6. Mark says:

    Labour economics got us into this mess by overspending and higher taxes, which sucked out of the economy the funding to create growth. Too many stealth taxes and theft from pension funds, 10 bn a year disappeared when Brown, Balls & Milliband were economic advisors to the party machine.

    UK pensions, which we all work towards, are the lowest in Europe byt taxes in the form of NIC’s are 25% of the wage roll. There is a surplus of 50 bn in the NI Fund,
    not being spent on pensions, but administered by the OBR.

    Does anyone know what the OBR running costs are?

    Interesting?

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