Wednesday, 7 July 2010

Nipped in the Budd.....

Sir Alan Budd, hand-picked chair of George Osborne's "independent" Tory quango, the Office for Budget Responsibility (OBR), has quit just two months after the election and a month after delivering its budget forecasts.

Rumours fly of bust ups and splits with Treasury ministers, or that Budd was miffed that David Cameron used leaks of his departments forecasts to counter newspaper allegations of predictions of huge job losses. Whatever the cause, the fact is that George Osborne's tame economist has chucked his hand in before his office is even properly established and its independence guaranteed. It's a disaster for the Tories, the coalition  and the Chancellor.

Of course such "independence" was not exactly guaranteed under Sir Alan. For younger readers who may not have heard of him, it is worth reminding them that Budd was a senior economic adviser to the Heath government in the early 1970s, helping to push through Anthony Barber's stock market and housing boom which was to culminate in a stock market crash and inflation rates of 27%.

Budd was also an advisor to the Thatcher government and one an advocate of Geoffrey Howe's disasterous 1980 budget, which doubled VAT (in breach of an election promise) and, in raising interest rates, led to a significant over-valuation of sterling on the markets.

British manufacturing and their export markets were rendered insolvent over night and unemployment trebled to 3.3 million. Budd admitted the hugely negative effects, but seemed to think they were a price worth paying for reducing the power of ordinary workers and the trade union movement.

Over the years, Budd's influence on economic policy has been disastrous, but he's a Tory to his bootlaces and he was Osborne's chosen man. So why would he quit now, before the spending review and before his forecasts have a chance to be proven correct (or not!)?

Could it be that Sir Alan has seen the light, that he realises that the coalition's economic strategy of cutting deep and fast is the wrong way to go, and he does not want to be tarred with its failure?

In any case, it's a fiasco, and an embarrassment for the coalition and for George Osborne in particular, and it bodes ill for economic policy if one of its mainstays has insufficient confidence and commitment to hang around for more than a few weeks.... 

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