When the post-election dust cleared and George Osborne moved in to the Treasury, one of his first acts was to set up the Office of Budget Responsibility. This latest addition to the roster of economic policy institutions had been trailed in Osborne’s Mais lecture, back in February. He claimed then that the Treasury had supinely provided first Gordon Brown, and then Alistair Darling, with whatever forecasts they wanted to support their political decisions.
So, he announced, from now on, the Treasury’s forecasts would be rigorously vetted by an independent body, the new Office for Budget Responsibility (OBR) – and, as a result, the chancellor’s public credibility would be restored.
Trailed as an innovation on a par with Gordon Brown’s 1997 decision to set up an independent Monetary Policy Committee within the Bank of England, the OBR looked like it could be a potentially useful body.
Two months on, however, Osborne’s cunning plan seemed in tatters. First, after a Treasury leak raised serious questions about the employment forecasts presented in the coalition’s emergency budget, the OBR rushed out some fresh figures conveniently in time for Cameron to head off the critics during prime minister’s question time in the House of Commons.
Shortly after, it was announced that the OBR’s chief, former top Treasury adviser Alan Budd, was going to resign after only three months in post. It also turned out that for all its vaunted independence, the OBR had set up shop within the Treasury, a few doors down from the chancellor.
Was this another political fiasco, on top of the abrupt departure of the first coalition chief secretary David Laws? Had the unexpectedly self-confident Osborne shot himself in the foot?
Well, not really. It turned out that Budd had all along only intended to head the OBR for three months in order to get it established. As for the physical location of the OBR, one might as well argue that the chancellor’s residence at 11 Downing Street meant that the prime minister could easily keep him on a tight leash. Try telling that to Tony Blair.
However, the establishment of the OBR does raise some important issues about how economic policy is made in a capitalist democracy.
Back in 1944, the Polish socialist economist Michal Kalecki famously predicted that as public spending became more and more important, governments would be tempted to engineer a boom towards the end of their term of office in order to get re-elected. Once back in power, they would then slam on the brakes and restore the fiscal balance, only to start spending again as the next election loomed. He called this ‘the political trade cycle’.
To avoid this political manipulation, a fiscal authority completely independent of the government of the day might seem to be a good idea – but it would also make ministerial government largely pointless.
Osborne’s OBR is an attempt to shore up the chancellor’s credibility by at least ensuring that his plans are based on ‘reliable’ forecasts of where the economy is going. But reliable forecasts can’t be made in a capitalist economy.
True, they are based on statistical models of how the economy has behaved in the past. But economists have fundamental disagreements about past economic behaviour, and in any case a capitalist economy is not like a machine that functions on the basis of stable linkages between its components.
As we know only too well from the credit crunch of 2007-08 and the ensuing crisis, the behaviour of financiers, businessmen and other economic actors – even politicians – is fundamentally unpredictable. Someone, therefore, has to make what amounts to a set of reasonable guesses.
The real story about the OBR concerns these guesses. Osborne’s budget projections over the period to 2014 are based on growth of 1.2 per cent this year and 2.6 to 2.8 per cent thereafter, despite falling public spending, notably a halving of investment. Yet an unprecedented private sector recovery will apparently reduce the number of unemployed people claiming benefits, from 1.6 million last year to 1.2 million. To most commentators, this is pie in the sky.
In addition, the profits of the financial sector are supposed to grow at nearly 9 per cent this year and 6 per cent a year thereafter, while house prices go up on average nearly 4 per cent per year. So forget about reining in the City and making housing more affordable: it’s back to business as usual – until the next crisis.
Hugo Radice is a political economist and visiting research fellow at the University of Leeds
Grassroots posters giving an alternative take on the general election
Hundreds of people surrounded the fences this weekend. Hera Lorandos spoke to women who have suffered inside.
Laying out the case for Labour's leadership of a Progressive Alliance, Jeremy Gilbert argues that far from posing a threat to the Left, the Progressive Alliance offers a golden opportunity to end Tory rule and build a 21st century government committed to social justice
The Greens have stood down in Brighton Kemptown to clear the way for Labour, and the Lib Dems won’t stand in Brighton’s other seat, Green-held Pavilion. Davy Jones, who would have been the Green candidate in Kemptown, says this shows the way forward
The snap general election represents a unique opportunity to defeat this terrible government. We believe that visual artists have a crucial role to play!
Drax is the UK's biggest source of CO2 emissions – and we're paying for it, writes Almuth Ernsting
For the past 3 years, Barby Asante and members of London-based artists' collective, sorryyoufeeluncomfortable, have been responding directly to the vision of James Baldwin. Ahead of the nationwide release of a new film about the American activist and author, they reflect on the enduring relevance of Baldwin in Britain today.
Housing campaigners' gains in Bristol are spurring on a national movement to build a renters' union, writes Stuart Melvin
A new Espionage Act threatens whistleblowers and journalists, writes Sarah Kavanagh
We need an anti-austerity alliance, not a vaguely progressive alliance, argues Michael Calderbank
Greece’s heavy load
While the UK left is divided over how to respond to Brexit, the people of Greece continue to groan under the burden of EU-backed austerity. Jane Shallice reports
On the narcissism of small differences
In an interview with the TNI's Nick Buxton, social scientist and activist Susan George reflects on the French Presidential Elections.
Why Corbyn’s ‘unpopularity’ is exaggerated: Polls show he’s more popular than most other parties’ leaders – and on the up
Headlines about Jeremy Corbyn’s poor approval ratings in polls don’t tell the whole story, writes Alex Nunns
The media wants to demoralise Corbyn’s supporters – don’t let them succeed
Michael Calderbank looks at the results of yesterday's local elections
In light of Dunkirk: What have we learned from the (lack of) response in Calais?
Amy Corcoran and Sam Walton ask who helps refugees when it matters – and who stands on the sidelines
Osborne’s first day at work – activists to pulp Evening Standards for renewable energy
This isn’t just a stunt. A new worker’s cooperative is set to employ people on a real living wage in a recycling scheme that is heavily trolling George Osborne. Jenny Nelson writes
Red Pepper’s race section: open editorial meeting 24 May
On May 24th, we’ll be holding the third of Red Pepper’s Race Section Open Editorial Meetings.
Our activism will be intersectional, or it will be bullshit…
Reflecting on a year in the environmental and anti-racist movements, Plane Stupid activist, Ali Tamlit, calls for a renewed focus on the dangers of power and privilege and the means to overcome them.
West Yorkshire calls for devolution of politics
When communities feel that power is exercised by a remote elite, anger and alienation will grow. But genuine regional democracy offers a positive alternative, argue the Same Skies Collective
How to resist the exploitation of digital gig workers
For the first time in history, we have a mass migration of labour without an actual migration of workers. Mark Graham and Alex Wood explore the consequences
The Digital Liberties cross-party campaign
Access to the internet should be considered as vital as access to power and water writes Sophia Drakopoulou
#AndABlackWomanAtThat – part III: a discussion of power and privilege
In the final article of a three-part series, Sheri Carr gives a few pointers on how to be a good ally
Event: Take Back Control Croydon
Ken Loach, Dawn Foster & Soweto Kinch to speak in Croydon at the first event of a UK-wide series organised by The World Transformed and local activists
Red Pepper’s race section: open editorial meeting 19 April
On April 19th, we’ll be holding the second of Red Pepper’s Race Section Open Editorial Meetings.
Changing our attitude to Climate Change
Paul Allen of the Centre for Alternative Technology spells out what we need to do to break through the inaction over climate change
Introducing Trump’s Inner Circle
Donald Trump’s key allies are as alarming as the man himself
#AndABlackWomanAtThat – part II: a discussion of power and privilege
In the second article of a three-part series, Sheri Carr reflects on the silencing of black women and the flaws in safe spaces
Joint statement on George Osborne’s appointment to the Evening Standard
'We have come together to denounce this brazen conflict of interest and to champion the growing need for independent, truthful and representative media'
Paul O’Connell and Michael Calderbank consider the conditions that led to the Brexit vote, and how the left in Britain should respond
On the right side of history: an interview with Mijente
Marienna Pope-Weidemann speaks to Reyna Wences, co-founder of Mijente, a radical Latinx and Chincanx organising network
Disrupting the City of London Corporation elections
The City of London Corporation is one of the most secretive and least understood institutions in the world, writes Luke Walter
#AndABlackWomanAtThat: a discussion of power and privilege
In the first article of a three-part series, Sheri Carr reflects on the oppression of her early life and how we must fight it, even in our own movement
Corbyn understands the needs of our communities
Ian Hodson reflects on the Copeland by-election and explains why Corbyn has the full support of The Bakers Food and Allied Workers Union
Red Pepper’s race section: open editorial meeting 15 March
On 15 March, we’ll be holding the first of Red Pepper’s Race Section open editorial meetings.
Social Workers Without Borders
Jenny Nelson speaks to Lauren Wroe about a group combining activism and social work with refugees
Growing up married
Laura Nicholson interviews Dr Eylem Atakav about her new film, Growing Up Married, which tells the stories of Turkey’s child brides
The Migrant Connections Festival: solidarity needs meaningful relationships
On March 4 & 5 Bethnal Green will host a migrant-led festival fostering community and solidarity for people of all backgrounds, writes Sohail Jannesari
Reclaiming Holloway Homes
The government is closing old, inner-city jails. Rebecca Roberts looks at what happens next
Intensification of state violence in the Kurdish provinces of Turkey
Oppression increases in the run up to Turkey’s constitutional referendum, writes Mehmet Ugur from Academics for Peace
Pass the domestic violence bill
Emma Snaith reports on the significance of the new anti-domestic violence bill