OBR chief writes to Cameron disputing his austerity programme claims(5 Posts)
Robert Chote says the government's spending cuts and tax rises have knocked 1.4% off GDP over the past two years
David Cameron was under pressure on Friday to withdraw claims that public spending cuts are not to blame for the UK's economic stagnation after the Treasury's independent economic forecaster said austerity had played a major role in putting the brakes on growth.
In an unprecedented move, the head of the Office for Budget Responsibility has written to the prime minister saying the government's austerity programme had knocked 1.4% off GDP in the past two years.
Robert Chote, the OBR chairman, was responding to the prime minister's "no turning back" defence of the government's economic record in a speech on Thursday.
Cameron said the OBR supported No 10's view that the lack of growth since the coalition took office was due to the eurozone crisis, a rise in oil prices and debts from the financial crisis.
The letter comes at a crucial time for the government following two years of almost zero growth and only a fortnight ahead of a landmark Budget that is expected to determine the future of chancellor George Osborne. Tory backbenchers and business lobby groups have become frustrated with the government's lack of action to boost growth and many were highly critical of the prime minister's no-turning-back speech in which he backed Osborne's refusal to adopt a Plan B.
Cameron said: "As the independent Office for Budget Responsibility has made clear, growth has been depressed by the financial crisis, by the problems in the eurozone and by a 60% rise in oil prices between August 2010 and April 2011. They are absolutely clear, and they are absolutely independent. They are absolutely clear that the deficit reduction plan is not responsible; in fact, quite the opposite."
But Chote said OBR reports made clear that tax rises and spending cuts in a succession of coalition budgets had hit growth.
He said: "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."
In the letter, which the OBR has published on its website, he said calculations based on widely used academic calculations that austerity has reduced economic growth by 1.4% in 2011-12.
A Downing Street spokesman said Chote's letter agreed with the PM that external factors held back growth, but he sidestepped the point made by the OBR chief that austerity has also played a part in depressing the economy.
The spokesman said: "The OBR has today again highlighted external inflation shocks, the eurozone and financial sector difficulties as the reasons why their forecasts have come in lower than expected. That is precisely the point the prime minister was underlining."
Chote was poached by George Osborne as head of the OBR 18 months ago from the Institute for Fiscal Studies. Osborne created the OBR in 2010 to provide independent forecasts for the Treasury.
How I laughed when that came out on the news earlier.
DC has been bending the figures and caught out.
Not the first time he's lied through his teeth. He seems to be making a habit of it. Witness his recent lies over the impact the 'bedroom tax' will have on disabled people.
Lie: People with severely disabled children are exempt.
Lie: People who need round-the-clock care are exempt.
I was amused by the commentator on Sky News who said that it was clearly a serious misrepresentation of the OBR's position, but probably not intentional. So Cameron wasn't lying, he is just too thick to understand what the OBR were actually saying?!
Doesn't reflect well on Cameron either way, does it?!
Richmond is a Tory area. But a lot of Tories dont trust cameron
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