The OBR rebukes Cameron for claiming that austerity has not hit growth

"Tax increases and spending cuts reduce economic growth", Office for Budget Responsibility head tells Cameron in letter.

In his "there is no alternative" speech on the economy yesterday, David Cameron confidently declared that the Office for Budget Responsibility had shown that the coalition's austerity measures have not harmed growth.

As the independent Office for Budget Responsibility has made clear…

…growth has been depressed by the financial crisis…

…the problems in the Eurozone…

…and a 60 per cent rise in oil prices between August 2010 and April 2011.

They are absolutely clear that the deficit reduction plan is not responsible.

In fact, quite the opposite.

But it turns out that the OBR doesn't think that at all. In a notable assertion of his independence, Robert Chote, the watchdog's head, has just written to the Prime Minister correcting the record.

Chote writes:

For the avoidance of doubt, I think it is important to point out that every forecast published by the OBR since the June 2010 Budget has incorporated the widely held assumption that tax increases and spending cuts reduce economic growth in the short term.

He reminds Cameron that the OBR's multipliers assume that "every £100 of fiscal consolidation measures reduce GDP in that year by around £100 for capital spending cuts, £60 for welfare and public services, £35 for increases in the VAT rate and £30 for income tax and National Insurance increases". Fiscal consolidation is estimated to have reduced GDP by 1.4 per cent in 2011-12 alone.

Chote adds that the OBR believes that weaker-than-expected growth is most likely due to higher inflation, deteriorating export markets and the recession in the eurozone. But he emphasises that this doesn't mean Cameron can claim that austerity has not hit growth, let alone that it has had "the opposite" effect (does he still believe in expansionary fiscal contraction?)

The OBR's original forecasts were premised on the assumption that spending cuts and tax rises depress output, even if subsequent downgrades have been largely attributed to other factors. As Chote puts it, "we believe that fiscal consolidation measures have reduced economic growth over the past couple of years, but we are not yet persuaded that they have done so by more than the multipliers we use would suggest."

In other words, Cameron was wrong. And the independent (no scare quotes required) OBR deserves credit for pointing out as much. But if, in addition to making growth forecasts, the OBR is going to start fact-checking Cameron's speeches, it will have its work cut out.

Just a month ago, as Staggers readers will recall, the PM was rebuked by the UK Statistics Authority for falsely claiming in a Conservative Party political broadcast that the coalition "was paying down Britain’s debts".

You can read Chote's letter in full below.

Letter From Robert Chote to Prime Minister

David Cameron delivers his speech on the economy during a visit to precision grinding engineers Cinetic Landis Ltd on March 7, 2013 in Keighley. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Boris Johnson is out of control, but Theresa May is too weak to punish him

Her weary “Boris is Boris” remark after his intervention suggests she couldn’t care less.

Only younger Tory MPs asked last weekend: “Why did Boris do it?” Why did he write a 4,000-word essay on his demands for Brexit, just six days before Theresa May would make a definitive speech on the government’s plans? The older ones knew why: he hadn’t been the centre of attention for a while and wanted to remind people of his existence and that he remained in the game. A charitable fringe of pro-Brexit MPs thought he did it because he is a sincere Leaver, motivated by a desire to ensure the democratically expressed will of the British people is discharged. However, theirs was not a view widely shared.

Others thought they could trace the motivation for Johnson’s intervention back to the events of June 2016. “The reputation of Vote Leave at the moment is a pile of shit,” one told me, referring to the campaign whose figurehead Johnson had been. The metaphor became even more pungent: “Going back to the £350m is like a dog returning to his vomit.” The figure, plastered on Vote Leave’s battle bus, was the amount Johnson and his friends claimed would be available post-Brexit to spend weekly on the NHS. It was quickly rubbished, with Nigel Farage’s Leave.EU campaign dismissing it outright. It was a gross, not a net, figure; it included the EU rebate, which ceases to exist when our contributions stop. David Norgrove, head of the UK Statistics Authority, has repudiated the assertion; and there are many other institutions, such as our tertiary education sector, that will lose EU money and expect the government to make it up. That Johnson should mention this fantasy figure in his article has bemused even some of that dwindling band of MPs who still see him as a possible future leader.

Although the piece was in Johnson’s familiar idiom, others detected in it the influence of Vote Leave’s former director, Dominic Cummings. Further evidence came in a bout of aggressive tweeting from Cummings after the pack turned on Johnson. An MP who worked with Vote Leave told me, “Cummings has returned. He is a narcissist. If he can’t get his own way, then he prefers to destroy: that was how he operated all through the campaign.”

Cummings, a former aide to Michael Gove, is like Johnson a publicity addict: both thirst to see their names in the media. He disappeared from view after Gove’s failed leadership bid, when Gove had to promise supporters that Cummings would not work in Downing Street if he won, so toxic was Cummings’s reputation after Vote Leave. Gove was quoted as supporting Johnson’s “vision”, a further sign of Cummings’s involvement. Within 24 hours, Gove’s friends denied that he supported any such thing but then, as Cummings went into action, Gove confirmed his backing for Johnson.

Johnson’s intervention did not grate with everybody. Some Brexiteer Tories, such as Jacob Rees-Mogg, felt that after a party debate dominated by ministers favouring a Brexit that looks like continued membership of the EU by other means – notably Philip Hammond – it was time the Foreign Secretary spoke out for something representing a cleaner break. Some also felt that, given his office, he had a right to have a public say on the matter, after months in which May had done her best to ignore him.

Her weary “Boris is Boris” remark after his intervention suggests she couldn’t care less, and suggestions he might resign are unlikely to concern her unduly. His remarks were not against party policy, but MPs trusted by Downing Street were at pains to stress that his views would have no effect on the content of the Prime Minister’s Brexit speech, for there had “never been any chance of Theresa going off-piste”.

Johnson’s intervention was, however, unhelpful to him and to May. Colleagues saw it as the consequence of his having spent the summer steaming with frustration because he had lost ownership of the Brexit issue. He has also, according to friends, developed a thinner skin of late, and feels wounded by frequent attacks on him in the media pointing out his disengagement, his laziness, his ambition and his generally poor impression of a foreign secretary. For so long the goût du choix of many younger colleagues, he now finds they take him no more seriously than most of his older ones do. He once took for granted that in a leadership contest MPs would choose him as one of the two candidates for a plebiscite of the membership; now few think that likely.

Too many colleagues have taken the Telegraph article as further proof of his inability to be a team player, and of his unfitness for higher office – which was why Gove dropped him last year. Referring to Johnson’s time as mayor of London, a colleague says: “He was a good chairman, when he had seven or eight deputy mayors. But he can’t do what a minister is supposed to do, which is to grasp a policy and deliver it.” Another highlights his skewed sense of priorities and the lack of a deft political touch. “Isn’t it astonishing that just as he should be sorting out all consular and diplomatic help for our people in the West Indies after the hurricane, he finds time to write a 4,000-word newspaper article? As usual, it’s not about what’s good for the country. It’s what he thinks is good for him.”

Yet, as Ken Clarke swiftly pointed out, Boris Johnson has shown that however much he annoys May, she is too damaged and vulnerable to sack him. When Amber Rudd, the Home Secretary, started mocking him as a “back-seat driver”, May was seen to be presiding over a cabinet whose most senior members were squabbling. Johnson’s self-indulgence also meant that the expectation surrounding May’s Florence speech, already considerable as she struggled to rebuild her credibility and that of her Brexit policy, became even harder to satisfy. 

Simon Heffer is a journalist, author and political commentator, who has worked for long stretches at the Daily Telegraph and the Daily Mail. He has written biographies of Thomas Carlyle, Ralph Vaughan Williams and Enoch Powell, and reviews and writes on politics for the New Statesman

This article first appeared in the 21 September 2017 issue of the New Statesman, The revenge of the left