Jacob Rees-Mogg slapped down by top expert after attacking Tories’ own budget watchdog
Jacob Rees-Mogg has been slapped down by a leading economist after he attacked the Tory government’s own Budget watchdog.
The Business Secretary slammed the Office for Budget Responsibility, which was set up by the government to mark its own homework.
Mr Rees-Mogg told ITV ’s Peston: “Its record of forecasting accurately hasn’t been enormously good.
“So, the job of chancellors is to make decisions in the round rather than to assume that there is any individual forecaster who will hit the nail on the head.
“There are other sources of information. The OBR is not the only organisation that is able to give forecasts.”
There were fears his remarks could spark a fresh wobble among investors as long-awaited OBR forecasts are published on October 31.
The watchdog – which was prevented from commenting on the mini-Budget – will unveil its calculation of what Liz Truss ’s borrowing-funded tax cuts spree will cost the economy.
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ITV)
And last night the director of the respected Institute for Fiscal Studies think tank rejected the Cabinet minister’s attack on the OBR.
Paul Johnson told ITV’s Peston: “I mean, of course, he’s right, forecasts are always wrong.
“Actually, the OBR has historically been over-optimistic consistently on the economy.
“The economy has actually done worse than the OBR has suggested”.
Mr Johnson added “of course” economic forecasts matter because “it’s really important for credibility, which has become so important over the last few weeks, that we have these official forecasts and the Chancellor responds to that by saying: ‘This is how I see my fiscal policy’.”
A lack of such forecasts during last month’s seismic mini-budget are thought to have contributed to the recent chaos in financial markets.
Turmoil has seen the pound plummeting, the cost of government borrowing soaring and the Bank of England forced to intervene.
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Felix Clay /eyevine)
The IMF’s chief economist today warned Kwasi Kwarteng’s mini-Budget “complicated matters” for the Bank of England’s efforts to bring down inflation.
Pierre-Oliver Gourinchas said: “When the mini-Budget was announced at the end of September, there was concern on our side”.
His comments came after the IMF issued an extraordinary statement last month urging the UK government to change course on massive tax slashing measures for the rich.
But Mr Rees-Mogg criticised the body, saying it “doesn’t know what it’s talking about”.
He said: “I think the IMF is wrong on both counts. I think it’s particularly wrong on energy, and frankly doesn’t know what it’s talking about…
“The IMF is not holy writ and the IMF likes having a pop at the UK for its own particular reasons. I’m afraid I would never lose too much sleep about the IMF.”
Earlier, the senior Conservative accused Today programme presenter Mishal Husain of failing to meet the BBC’s impartiality standards after she suggested the mini-budget had unleashed the market turmoil.
Mr Rees-Mogg sought to claim that the Bank of England’s decisions on interest rates had caused the turbulence, rather than Mr Kwarteng’s plans to borrow more to fund tax cuts.
Ms Husain said there is a “very serious economic and investor confidence picture that has been sparked by the mini-budget” as she questioned the minister on BBC Radio 4’s Today programme.
Mr Rees-Mogg told her: “You suggest something is causal, which is a speculation.
“What has caused the effect in pension funds, because of some quite high-risk but low-probability investment strategies, is not necessarily the mini-budget – it could just as easily be the fact that, the day before, the Bank of England did not raise interest rates as much as the Federal Reserve did.
“And I think jumping to conclusions about causality is not meeting the BBC’s requirement for impartiality, it is a commentary rather than a factual question.”
He added: “I’m saying it’s primarily caused by interest rate differentials rather than by the fiscal announcement.”
Labour’s shadow chief secretary to the Treasury Pat McFadden said: “Even now, Tory Cabinet Ministers do not appear to have learned lessons since their disastrous mini budget.
“The more they publicly trash economic institutions like the OBR, the more they undermine market confidence in their plans and their management of the UK economy.
“The Tories are out of control and working people are being made to pay the price with higher mortgage payments.”
Financial experts also roundly rejected the Business Secretary’s analysis that interest rates were to blame for the market turmoil.
Gillian Tett, Financial Times US editor-at-large, told Channel 4 News: “To use a non-technical term, that’s pretty much bollocks.”
Deutsche Bank’s chief UK economist Sanjay Raja told the Commons Treasury Committee the mini-budget on September 23 was the “straw that broke the camel’s back”.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “The origin of these problems seems to have been caused mainly by the mini-budget, because of market reaction to that mini-budget, because of uncertainty about the Government’s plans.”