RSSeNEWS to be determined...

In a bid to restore confidence in government economic forecasts, Chancellor George Osborne has announced the establishment of a new independent Office for Budget Responsibility (OBR).

In his announcement, Osborne said "our approach is to boost confidence in and credibility of the UK's fiscal framework - we need a full independent assessment of how bad the problem really is. The public and the markets have completely lost confidence in government economic forecasts … I believe the public should be able to trust official forecasts for the economy; I want independent forecasts to become the norm".

The chancellor pointed out that the final decision on economic forecasts had always been made by the chancellor, not by independent officials. He said that "again and again" chancellors had been tempted "to fiddle the figures … to nudge up a growth forecast or reduce a borrowing number to make the numbers add up".

The move has been likened to Gordon Brown's 1997 establishment of the Bank of England's independent Monetary Policy Committee (MPC) that monitors inflation and sets the bank lending rate.

Initially the OBR will operate on a non statutory basis, just as the MPC did. It will be headed by former MPC member Sir Alan Budd, who Osborne described as "a man of immense integrity and indisputable independence."

BBC economics editor Stephanie Flanders commented "this new institution has the potential to become a hugely powerful force … when it comes to budget policy, this government is going to be on a much shorter leash than the one that came before.

"… At least twice a year, this unelected three person body, with its own staff, will publish independent fiscal forecasts around the time of the Budget and pre-Budget report … On the basis of its independent forecast, it will then recommend how much policy needs to be tightened or loosened to have a decent chance of meeting that goal."

She acknowledged that the chancellor could ignore this advice, but that "politically this will be very difficult to do".