Budd denies jobs data were massaged

Sir Alan Budd has forcefully rejected the suggestion that ministers influenced forecasts for public sector job losses by his Office for Budget Responsibility, following the Financial Times’s disclosure that its last-minute changes had appeared to reduce the impact of the emergency Budget.

“It was genuinely a forecasting correction with no ministerial interference at all,” he told the FT on Friday. But that acknowledgement could not obscure the fact that it has been a terrible fortnight for the new fiscal watchdog.

Two weeks ago, Sir Alan, its interim chairman, was riding high after the Institute for Fiscal Studies refrained from raising its customary doubts about the official forecasts at its post-Budget briefing. But today he knows the OBR has a battle on its hands to safeguard its claims to independence after three conspicuous blunders.

First, the OBR’s forecasts for job losses were leaked; then new figures were released shortly before prime minister’s questions, allowing David Cameron to discomfit Labour. Finally came the news that Sir Alan would soon step down.

Even though George Osborne, the chancellor, insisted that the OBR set its own forecasts, this was not enough to convince Alistair Darling, shadow chancellor, who said the credibility of the OBR was now at stake.

“Right from the start the Tories used the OBR not just as part of the government but as part of the Conservative party. They have succeeded in strangling what could have been a good idea at its birth,” Mr Darling added.

Sir Alan acknowledged the forecasting changes had damaged the OBR’s reputation. He also conceded that the Budget would cause 175,000 additional public sector job losses, and that the OBR should have provided the public with more information on the effect of its forecasting changes.

“I recognise the disquiet this has raised,” he said on Friday.

His chance to start rebuilding the OBR’s reputation will come on Tuesday when he gives evidence to the Commons Treasury committee explaining how he expects the body to become a permanent feature of the economic landscape.

One issue is whether he will take the prime minister to task over his citation of two sets of incomparable OBR figures on public sector job losses in the Commons last month. Sir Michael Scholar, chairman of the UK statistical authority, made similar criticisms of Mr Cameron last month.

Meanwhile, the OBR is taking steps to bolster its independence. It has lost its Treasury spokesman and will soon move out of the building. In future, it is also unlikely to be staffed solely by Treasury officials on secondment. Sir Alan would like employees to owe their careers to the OBR not the Treasury.

Even though he insists the official forecast must be seen as the work of the OBR not the government, Sir Alan does not want to duplicate Treasury work nor remove its forecasting function. Instead, he thinks the OBR will need 10 to 20 staff, who are clearly working for the OBR.

The OBR’s chairman must, he believes, have a robust approach to independence, understand the importance of upholding the body’s reputation and be able to communicate effectively. Sir Alan thinks this will help turn it from an organisation under fire into a dignified body commanding the respect of the public and all political parties.