The Business Secretary claimed the watchdog’s record of forecasting accurately has not been ‘enormously good’.
12 October 2022
Business Secretary Jacob Rees-Mogg has disparaged the Office for Budget Responsibility (OBR) and suggested Kwasi Kwarteng could ignore potential forecasts of low growth and rising debt.
Independent OBR assessments of the UK economy will accompany the Chancellor’s plan to pay for his economic measures and reduce debt on October 31.
A lack of such forecasts during last month’s seismic mini-budget are thought to have contributed to the recent chaos in financial markets – with the pound plummeting, the cost of government borrowing soaring and the Bank of England forced to intervene.
In a pre-recorded interview on ITV’s Peston, Mr Rees-Mogg said: “Let’s see what the Office for Budget Responsibility has to say rather than guessing what it may say.
“But its record of forecasting accurately hasn’t been enormously good.
“So, the job of chancellors is to make decisions in the round rather than to assume that there is any individual forecaster who will hit the nail on the head…
“There are other sources of information. The OBR is not the only organisation that is able to give forecasts.”
The Cabinet minister’s comments are unlikely to reassure investors seeking a firm commitment from the Government to get the nation’s finances under control.
Mr Rees-Mogg also lashed out at the International Monetary Fund (IMF) after it called for the UK’s economic support package to be more targeted and for fiscal policy to be tightened.
He said: “I think the IMF is wrong on both counts. I think it’s particularly wrong on energy, and frankly doesn’t know what it’s talking about…
“The IMF is not holy writ and the IMF likes having a pop at the UK for its own particular reasons. I’m afraid I would never lose too much sleep about the IMF.”
Earlier, the senior Conservative accused Today programme presenter Mishal Husain of failing to meet the BBC’s impartiality standards after she suggested the mini-budget had unleashed the market turmoil.
Mr Rees-Mogg sought to claim that the Bank of England’s decisions on interest rates had caused the turbulence, rather than Mr Kwarteng’s plans to borrow more to fund tax cuts.
Ms Husain said there is a “very serious economic and investor confidence picture that has been sparked by the mini-budget” as she questioned the minister on BBC Radio 4’s Today programme.
Mr Rees-Mogg told her: “You suggest something is causal, which is a speculation.
“What has caused the effect in pension funds, because of some quite high-risk but low-probability investment strategies, is not necessarily the mini-budget – it could just as easily be the fact that, the day before, the Bank of England did not raise interest rates as much as the Federal Reserve did.
“And I think jumping to conclusions about causality is not meeting the BBC’s requirement for impartiality, it is a commentary rather than a factual question.”
He added: “I’m saying it’s primarily caused by interest rate differentials rather than by the fiscal announcement.”
Labour’s shadow chief secretary to the Treasury Pat McFadden said: “Even now, Tory Cabinet Ministers do not appear to have learned lessons since their disastrous mini budget.
“The more they publicly trash economic institutions like the OBR, the more they undermine market confidence in their plans and their management of the UK economy.
“The Tories are out of control and working people are being made to pay the price with higher mortgage payments.”
Financial experts have roundly rejected the Business Secretary’s analysis that interest rates were to blame for the market turmoil.
Gillian Tett, Financial Times US editor-at-large, told Channel 4 News: “To use a non-technical term, that’s pretty much bollocks.”
Deutsche Bank’s chief UK economist Sanjay Raja told the Commons Treasury Committee the mini-budget on September 23 was the “straw that broke the camel’s back”.
Mr Raja argued there is “absolutely a global component” to the chaos but was adamant there is an “idiosyncratic UK-specific component” as well.
He said the “trade shock” because of Brexit is a factor, and added: “You throw on the September 23 event, you’ve got a sidelined financial watchdog, you’ve got lack of a medium-term fiscal plan, one of the largest unfunded tax cuts we’ve seen since the early 1970s, it was kind of the straw that broke the camel’s back.”
Resolution Foundation chief executive Torsten Bell was clear the huge package of cuts should not have happened during the current febrile financial environment.
“If you spend the summer telling people you are intending to abandon fiscal orthodoxy, if you then announce a package that dumps fiscal orthodoxy, then if you say on Sunday you are going to keep doing it, then I don’t think any of this should be a surprise to any of us that this is where you end up,” he said.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “The origin of these problems seems to have been caused mainly by the mini-budget, because of market reaction to that mini-budget, because of uncertainty about the Government’s plans.”