24 November 2017
A FORMER adviser to Margaret Thatcher has warned that the “independent” organisation set up to make predictions on the economy has become the latest weapons in the Remain campaign’s project fear.
Professor Patrick Minford, the chairman of Economists for Free Trade, has questions the data and methodology used by the Office for Budget Responsibility , which was originally created by former Chancellor George Osborne the architect of Project Fear in the referendum.
Writing for Express.co.uk, Professor Minford said that the OBR has lost its reputation for respected neutrality after it massively downgraded Britain’s growth forecasts for this week’s Budget.
The OBR said the UK’s economic growth will be 1.4 per cent in 2018 down 0.2 per cent from its prediction in March; 1.3 per cent in 2019 down 0.4 per cent; 1.3 per cent in 2020 down 0.6 per cent; and 1.5 per cent in 2021 down 0.5 per cent.
Prof Minford said: “With this Budget the OBR moved from its intended status as an independent ‘watchdog’ providing uncontroversial forecasts of the public finances, and into the spotlight as the purveyor of a forecast widely regarded as biased downwards in a serious way for a serious period, the next five years; so scuppering the well-meaning hopes of Philip Hammond to provide an upbeat Budget.
“It has told all and sundry that this was forced on it by the behaviour of productivity growth underperformance.”
The leading economists, who was one of the few to support Thatcher’s successful economic revolution and correctly warned that the euro would be a disaster, derided the OBR for using “productivity” – the amount produced by a worker per hour – as a marker for growth.
He described the analysis as “flimsy” at best and pointed out that it was based on the outdated Keynesian theories of the 1970s.
He said: “This sort of ‘Old Keynesian’ model may be convenient but it is quite at odds with the behaviour of the economy, not to speak of modern theory.”
He also challenged the OBR’s claim that it was “Brexit neutral” in its forecasts describing it as “disingenuous”..
He said: “As a result their export assumption due to Brexit is lowering output growth and in so doing also lowering import growth: not ‘neutral’ at all!”
Prof Minford said that productivity is hard to measure in reality because it does not take into account that the faster growth rate of new jobs with more than 3 million extra jobs since 2010.
He warned that the predictions could damage Britain because it gives a gloomy picture of the country’s prospects just as Brexit is about to deliver new prosperity.
He said: “It is darkest before the dawn. How ironic if the OBR has shot us, the Chancellor, and itself in the foot just when the cavalry was coming over the hill!”