OBR chief warns Britain will miss growth targets

Robert Chote, head of the OBR, suggests that the Chancellor will miss his 1.7 per cent growth target

The head of the government's Office for Budget Responsibility (OBR) has indicated that he believes the Chancellor, George Osborne, will miss his 1.7 per cent growth target for the year.

In an interview with the Independent, Robert Chote said:

Back in March our central forecast was for 1.7 per cent growth this year, which at the time was fractionally more pessimistic than the average of the outside forecasters.

Since then obviously we've had weaker out-turns in the first and second quarters than most people, including us, anticipated. For the second quarter the ONS [Office for National Statistics] explained a variety of one-off factors that contributed to that.

As a simple matter of arithmetic, in order to get to 1.7 per cent now you'd be looking for quarter-on-quarter growth rates of 1 per cent in the second and third quarters of 2011, and there aren't many people out there expecting that.

Chote's comments will add to the pressure on Osborne, amid dismal official figures that show the economy flatlining. And he is not the first to question the 1.7 per cent figure. Earlier this week, the IMF cut Britain's growth forecast from 1.7 to 1.5 per cent, warning that the UK faces a "bumpy and uneven" recovery. This week, the National Institute for Economic and Social Research warned that "in the short-term, fiscal policy is too tight, and a modest loosening would improve prospects for output and employment with little or no negative effect on fiscal credibility".

The OBR will not produce a new forecast until later in the year, when the Chancellor gives his autumn statement. However, Chote's remarks indicate that he is keen to show that the OBR is not out of touch with developments in the economy. As voices across the political spectrum continue to voice concern about economic recovery -- the slowest in a century -- the Chancellor must show he is listening. Even the IMF, which broadly backs the austerity measures, warned that the government must be willing to respond if growth and inflation do not develop as planned.

Chote did not rule out the possibility of a "bounce back", saying "there are potential pressures in both directions". However, if this does not happen, as looks likely, Osborne must work on that ever-elusive "plan for growth". At the moment, one would be forgiven for thinking it does not exist.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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