Budd says OBR needs to be free of Treasury to ensure independence

Office of Budget Responsibility (OBR) chairman Sir Alan Budd has published his recommendations on how the watchdog can be made more independent following criticism its initial projections for the UK economy were hampered by government intervention.

Budd (pictured) and his colleagues in the three-man body, Geoffrey Dicks and Graham Parker, have published seven recommendations:

• the OBR should produce forecasts for the economy and public finances;
• forecasts should be produced at least twice a year and include the official Budget forecast;
• the OBR should undertake broader analysis of fiscal sustainability;
• the technical independence of the OBR should be enhanced through the transfer of analytical capacity from the Treasury to the OBR;
• the OBR should employ a mix of external recruits and staff from the Treasury to produce forecasts and analysis;
• Parliament should have a role in the appointment of the members of the Budget Responsibility Committee; and
• the OBR should be located outside the Treasury building.

The three men met with a number of Britain’s top economists before drawing up the recommendations amid widespread concern about the independence of the Office’s initial forecasts.

‘In general, attendees agreed that independence was of critical importance for the OBR and there was significant discussion of how this might best be achieved,’ the trio said in the seventeen page document.

On Friday, Treasury officials admitted the newly formed body made last minute changes to its forecasts which downplayed the risks from the government's unprecedented spending cuts.

Last Wednesday and just two months into the job, Budd said he would not renew his three-month contract.

The first two reports from the OBR were met with incredulity by most economists. The heckling grew louder after the Office published jobs data just ahead of Prime Minister’s Questions.

The data predicted two million jobs would be created by the private sector over the current parliament, far more than have been created in that time-frame in modern history.

It also said only 499,000 jobs would be lost in the public sector, but that was its second stab at a forecast. Its first had said the figure would be 175,000 higher.

The previous government had said job losses in the sector would total 460,000 under its less draconian plans.

The search is now on for a replacement who will be seen to be sufficiently independent and will be able to put together a new team by the end of October, when chancellor George Osborne's will publish his spending review.