• Prime Minister said oil prices and Euro crisis responsible harming growth
  • Claimed the Office for Budget Responsibility backed his view
  • But watchdog chairman says spending cuts have curbed growth
  • Labour seizes on intervention as ’embarrassing’

By
Gerri Peev

23:47, 8 March 2013


|

23:48, 8 March 2013

Prime Minister David Cameron has been given an embarrassing rebuke by the budgetary watchdog

Prime Minister David Cameron has been given an embarrassing rebuke by the budgetary watchdog

Britain’s independent fiscal watchdog has rebuked David Cameron for claiming it backed the Government view that austerity measures are not to blame for the lack of economic growth.

In a speech on Thursday, the Prime Minister said the economy had been harmed not by spending cuts and tax rises to reduce the deficit, but by soaring oil prices and problems in the eurozone.

He said this view was backed by the Office for Budget Responsibility, which was set up by the Coalition in 2010. Mr Cameron claimed the OBR was ‘absolutely clear that the deficit reduction plan is not responsible [for low growth], in fact, quite the opposite’.

But in an unprecedented rebuff, Robert Chote, the OBR’s chairman, said it has always argued that spending cuts and tax rises would impact on economic growth.

Mr Chote wrote: ‘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.

‘To summarise, we believe that fiscal consolidation measures have reduced economic growth over the past couple of years.’

But Mr Chote agreed that the 2008 financial crisis, chaos in the eurozone and high oil prices were ‘more likely explanations’ for why growth had been even weaker than expected.

Labour seized on the letter, saying it was ‘embarrassing’ for Mr Cameron.

Ed Balls, the Shadow Chancellor, said: ‘This is another embarrassing rebuke for the Prime Minister, just 24 hours after his panicky and defensive speech on the economy.

‘Deep spending cuts and tax rises have reduced economic growth, as the OBR says, and so it was deeply misleading for David Cameron to claim otherwise.’

He added: ‘David Cameron must be living on another planet if he thinks spending cuts and tax rises have had no impact at all.’

The Prime Minister was slapped down last month by the head of the independent UK Statistics Authority for saying the Government was reducing its debt, when in fact it was rising.

A Downing Street spokesman said the OBR had 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,’ he added.

Business Secretary Vince Cable backed the PM, saying the squeeze on British living standards was not ‘primarily due to the impact of the Government’s measures’.

Ed Balls
Tim Farron

Critics: Shadow Chancellor Ed Balls, left, described the intervention as ’embarrassing’ while Lib Dem president Tim Farron, right, said it was wrong to ‘overstate what the OBR is saying for political reasons’

But Lib Dem president Tim Farron, said it was wrong for the Prime Minister to ‘overstate what the OBR is saying for political reasons’.

‘We have to accept what they say. We might not always agree with it, but the figures which the OBR put out have to be taken at face value,” he told the BBC News Channel.

Business Secretary Vince Cable has been openly calling for a more relaxed approach to borrowing to allow more spending on infrastructure to boost growth, despite the coalition’s focus on trying to reduce the deficit.

But the government’s economic strategy was dealt a blow when Britain’s AAA credit rating – trumpeted by Chancellor George Osborne as a sign that he was on the right track – was downgraded last month.

Business Secretary Vince Cable backed David Cameron saying the squeeze on living standards has not been cause by the Government's austerity measures

Business Secretary Vince Cable backed David Cameron saying the squeeze on living standards has not been cause by the Government’s austerity measures

He now faces pressure from Lib Dems to raise spending on infrastructure while Tory backbenchers are demanding tax cuts to stimulate growth.

Insiders believe that the letter from Mr Chote was a legitimate attempt by the OBR to reassert its independence from politicians.

Vince Cable the Business Secretary, backed the PM. He said the squeeze on British living standards was not ‘primarily due to the impact of the Government’s measures’.

‘We’re doing what we have to do, getting the economy right. The evidence is very clear that the squeeze on living standards that took place, which was very painful, was not primarily due to the impact of the Government’s measures and the Government had to take action on the budget,’ he told Sky.

‘We inherited at that time the largest deficit in the developed world. We had to do something about it. We’re going to continue to do something about it.’

Sir Alan Budd, the former head of the OBR, said Mr Chote’s letter should act as a warning to politicians that they would be publicly corrected if they misused independent figures. He said he was surprised that someone briefed David Cameron to say ‘the deficit reduction plan is not responsible, in fact quite the opposite’ in his speech yesterday.

‘I think it’s a firm, polite letter, and it’s extremely important that it has been written, quite how it balances in people’s minds is a much more difficult matter. I think the important thing here is that the Office for Budget Responsibility must be extremely determined to show that it is independent,’ he told BBC Radio 4’s Today programme.

Sir Alan added: ‘I think he has to be more careful about what he says but again these are political matters, those are for the politicians to decide. But I hope what politicians from both parties are aware of is if they misuse information from these independent institutions then they will be publicly corrected.’

The comments below have not been moderated.

I was under the impression if you were caught lying to the house, you resigned or at least apologised, but this slippery man will, by next wednesday try to blame labour, or twist it so he will claim he,s been misquoted.

What happened to the days when politicians took responsibility for their for their actions. I dispair for the future of politics caused by the actions of lying, expences fiddling, here have my penalty points MP,s who represent us, look at the apathy they are causing to the number of BRITAINS voting.

colbro
,

S Wales, United Kingdom,
09/3/2013 04:07

UKIP for me

the truth
,

cupar, United Kingdom,
09/3/2013 03:50

The man is full of BS.

jon
,

PA, United States,
09/3/2013 03:35

So now we know from officials at the OBR, Osborne’s austerity, combined with tax rises (VAT) and benefit cuts (housing and DWP sanctions) for the poor but massive tax cuts for the rich (50p tax) have FAILED. Hear that people? Osborne’s policies have killed growth, not the Eurozone or anything else but Osborne. Ed Balls has been proven right, yet again.

xXDanielleXx
,

London, United Kingdom,
09/3/2013 03:27

Clueless

blueboy
,

leicestershire,
09/3/2013 03:27

John S, Bromley

you think there is no austerity because spending has gone up? It’s where the money is going, not to th epeople or places that need it.

Sirbigbeak
,

North,
09/3/2013 03:25

DEFINITION of MISQUOTE……..TWIST……DISTORT………MUDDLE…..FALSIFY….. MISREPORT in other words LIES as always thats the only thing David Cameron is good at LYING to the BRITISH PEOPLE…….UKIP for me

Beat Girl
,

Isle of Wight, United Kingdom,
09/3/2013 03:17

Cameron caught red handed lying to the people of britian and who now can believe a word what comes out of his mouth. His policies have made everything worse than what it would of been if stayed in the nursery at eton. Boris has sealed his fate with wasting £ 1billion a cycle lanes what are not needed in London and supporting the closure of the A&E at Lewisham hospital. Large chunk of people served by the A&E at Lewisham hospital will not be voting for boris at the next mayor election or any tory if he is replaced. Boris has turned out to be worse than Livingston and the reason why one person should not have all the say what should happen. Get rid of the London mayor he is not needed.

TORYPARTY-EVIL-PARTY
,

London,
09/3/2013 03:16

VOTE UKIP !

Ross
,

Ayrshire,
09/3/2013 03:09

so an office set up by cameron and co have backed him. surprise surprise. he invented their jobs surely they wouldn’t contradict him. heaven forbid.

TopCatNI
,

Belfast,
09/3/2013 03:08

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