Quote JerryChicken="JerryChicken"Excellent, its always someone elses fault.
Neil actually asks the question that I raised last night - "You knew what the problems were when you formed the coalition..."
The answer ? "We relied on forecasts by economists which were wrong"
Not, "We're making this up as we go along but really there is only this one idea of what to do"
And of course you can always rely on "We inherited the biggest ...."
Still they struggle for ways to explain that as fresh faced graduates who haven't even started to shave yet they shouldn't have applied for the job in the first place, but hey, its good money...'"
The one good thing Osborne has done IMO is bringing in the OBR to be an independent body that makes economic forecasts. However, the line of "well the forecast was wrong" is a cheap one because you have to understand any economic forecast of the future in the context it is made: it is based on making a model out of past information, with all the information available to the forecasters at the time. You know there will be events in the future ('random shocks') that you can't foresee, that will affect the economy for better or for worse - so a forecast aims to make it so the prediction isn't biased either on the upside or the downside, ie there is as much chance of a positive random shock, as a negative random shock.
If a forecaster is doing their job well, then over time, they should get it wrong as much by overestimating, as by underestimating. If they are persistently overestimating, then they aren't estimating accurately, there is something wrong in their model.
But also some people have unrealistic expectations of an economic forecast. You can no more see into the future than Mystic Meg - all you can do is give a best projection based on all the information available at the current time, so that it can guide policymakers. Firms do the same when they forecast their sales and margins through the year - if a firm was to forecast £10 million profits for the year, and then two months down the line, a scandal breaks where their product is shown to be unsafe, their profits will be smashed....but there would be no point blaming the forecasters for getting it wrong, they should blame the product control unit.
The OBR made its first forecast in June 2010 just after the election, and their view in the light of all the information available at the time, was that the UK economy would grow 2.6% in 2011 and 2.8% in 2012. The actual growth rates were 0.9% in 2011 and 0.0% in 2012.
The government's spin can be "well the forecasters got it wrong" but if they actually believe the OBR to be unfit for purpose they should close it down and stop spending tax payers money on it. The alternative explanation is that, the UK's performance should have been more in line with that forecast by the OBR in 2010, and the government's policy decisions are related to why it has been so disappointing.
