TUC will urge John Healey to order \u2018root and branch\u2019 assessment of watchdog amid claims its forecasts downplay investment benefits<\/p>\n
The TUC is urging the new chancellor, John Healey, to order a \u201croot and branch\u201d review of the Office for Budget Responsibility, claiming the forecaster\u2019s approach holds back investment.<\/p>\n
With Andy Burnham promising \u201cgood growth in every postcode\u201d, the union umbrella body is calling on Healey to use his first budget on 28 October to re-examine the assessments of the watchdog.<\/p>\n
In particular, it accuses the OBR of downplaying the benefits of public investment, by assuming it \u201ccrowds out\u201d private capital \u2013 an approach disputed by some economists.<\/p>\n
Paul Nowak, the TUC\u2019s general secretary, said: \u201cFor too long, the OBR has been a millstone preventing good growth across the country.<\/p>\n
\u201cThe world has moved on from the self-defeating logic of austerity, but the OBR models still bake in its false assumptions. Only a root and branch review can bring the OBR into the modern economic mainstream.\u201d<\/p>\n
The TUC\u2019s critique echoes calls for a restructuring of the independent forecaster from a range of thinktanks and campaign groups, including Progress, from the right of the Labour party, and the leftwing New Economics Foundation.<\/p>\n
Louisa Dollimore, of the Good Growth Foundation thinktank, previously called the body \u201ca backseat driver with out-of-date maps\u201d that \u201cobstructs long-term planning and investment at a moment when Britain needs both\u201d.<\/p>\n
Healey\u2019s predecessor, Rachel Reeves, recently picked economics professor Jonathan Haskel as the next chair of the OBR, after the resignation of Richard Hughes last December, after the OBR inadvertently published details of the budget in advance.<\/p>\n
Haskel, a former member of the Bank of England\u2019s monetary policy committee, will have to oversee a new economic forecast to inform this year\u2019s budget.<\/p>\n
He told MPs on the Treasury select committee last month that he was more pessimistic about the outlook than some other experts. \u201cMy \u2060forecast would be in the medium term of somewhat higher interest rates and weaker GDP growth than \u200bmost are expecting,\u201d he said.<\/p>\n
Haskel also told the committee in a public hearing that Britain was \u201cnot in a very good fiscal position\u201d.<\/p>\n
The TUC is also calling on the chancellor to beef up investment bodies such as the National Wealth Fund (NWF), to take advantage of flexibility built into the fiscal rules.<\/p>\n
Reeves revised the rules so that government borrowing does not count against Treasury targets if it is matched by a financial asset \u2013 such as a share in a company or a loan.<\/p>\n
The TUC says this should allow for significant additional investment by government-backed institutions including the NWF and the National Housing Bank.<\/p>\n