To OBR or not to OBR? That’s the manifesto audit question

libdemmanifesto 2010 wordleEd Balls wants it. Danny Alexander seems pretty keen on it, too. What is ‘it’? Asking the independent Office for Budget Responsibility (OBR) to audit the manifestos of political parties.

On the face of it, that’s a good idea. Transparency’s a good thing and surely the public deserve to know as much as possible before we cast our once-in-five-years ballot which decides the next government? The case in favour is persuasively put by Giles Wilkes, until recently a special adviser to Vince Cable who has seen the workings of government from the inside, at his blog here:

While [the OBR] works out to one decimal place what will have to be spent on overall departmental spending, it doesn’t go the final half-inch and explain what that means for individual departments. It would be trivially easy to do so – just as it would be trivially easy to work out the debt and deficit implications of different parties’ plans. Hey, even I could do it.

The OBR should be tasked with working out the likely implications for individual departments of all three parties’ pledges. A bigger prize for Labour etc would be to be able to say “Your fiscal surplus can only be achieved if you do XXXX to the NHS, YYYY to the schools system, or ZZZZ to the other departments”. In my view, this would rebalance the debate in a very welcome way.

However, the case against is also pretty strong. Here, for example, are Philip Booth and Ryan Bourne from the Institute of Economic Affairs (IEA). And yes, I know what many LDV readers think about the IEA, but their point is a valid one – that much in economics and politics is contested:

[The] “tax and spend” policies of governments interact with other policies. For example, the impact of a change in stamp duty could be offset by (or, potentially made greater by) a substantial liberalisation of planning controls. Immigration, employment regulation and so on all interact with the tax system so that policies presented at elections are a package, not a menu of bland accounting numbers.

So if one is costing tax and spend policies, one should also ‘cost’ immigration policies, the merits or demerits of nuclear deterrent policies as insurance against attacks, the effects of policies on employment, and so on. This would be incredibly difficult, and the assumptions should be challenged and debated.

In case readers think we are nitpicking, it should be borne in mind that the Government has missed its deficit reduction targets not as a result of its spending and tax figures being wrong, but because of the lack of economic growth caused by a whole range of other policy mistakes and unforeseen events.

I’m all for transparency and for a well-informed electorate. However, I’m not sure putting the OBR in this invidious, inevitably politicised, position is the right thing to do.

Besides, we already have a couple of organisations undertaking this role: the Institute for Fiscal Studies and the Centre for Economics and Business Research. Before the 2010 election, I wrote about the IFS’s Election Briefing 2010 verdict. On the Lib Dems, for example, it found our proposals added up – that is to say, our spending commitments were balanced by our proposed cuts and tax rises.

However, the IFS was also clear that the party’s manifesto got nowhere near identifying the cuts needed to start tackling the budget deficit – we identified only 25% of measures needed. We did better, according to the IFS, than either Labour or the Tories, mind you.

Did the IFS verdict make any impact on voters’ decisions? I doubt it. The media largely ignored it, preferring the gladiatorial contest of the televised Leaders’ Debates. And in any case the voters would mostly have concluded that there wasn’t much difference between the parties and besides what more do you expect of politicians? These are issues, I suspect, well beyond the powers of the OBR.

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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11 Comments

  • The IEA arguments are valid ones, but I still think on the whole this would be a valid improvement. Even if it is just – yes, your numbers do add up – that might help in focusing the debate more on the long term vision, less on VAT bombshells and the like and maybe even bring about the realisation that the government has a more limited influence on longer term economic trends than is widely thought.

  • Surely, as a matter of principle, it would be a very dangerous step for an official body to issue statements approving or disapproving of the contents of party manifestos.

    Far preferable for this role to be played by the IFS and other unofficial bodies.

  • Bill le Breton 26th Jun '14 - 7:02pm

    I’d be in favour, but actually we also need to ask why tax, spend and borrowing policies are not put under better scrutiny anyway.

    Giles has shown that given openly available information it is relatively easy to examine the consequences of budget and autumn statement decisions. The structure of the budget is outlined by the Treasury website, and the figures are given by the OBR. Simples: anyone who served on the P and R committee of a council up until a few years ago would be able to do it.

    As I have said elsewhere, the decisions Liberal Democrats make in the negotiations this summer that lead up to the Autumn Statement 2014 to be ‘revealed’ in (probably) first week of December 2014 are fraught with dificulty.

    Thanks to statements by Osborne and now by Nick Clegg there should actually *only* be agreement for 15/16 and 16/17 and some method of reserving positions in the years that follow.

    And the 2015 budget will intensify those difficulties. So at that stage there should (but won’t) be much more pressure from the Fourth Estate to unearth Labour (and UKIP?) plans. It is an anachronism that there is not a requirement for HMOpposition to table a full budget amendment – but then that might require Treasury time/input.

    However, especially in a fixed term Parliament would that not be prudent for the country which may have that budget inflicted upon them after the election?

    Anyone who doiesn’t understand what is meant by a budget surplus should have a look at the really excellent exposition by Adam Corlett here: http://centreforumblog.wordpress.com/2014/04/10/adam-corlett-sod-the-surplus/

  • Bill le Breton 26th Jun '14 - 7:09pm

    Chris, it would not be dangerous. It has been a requirement in local government for many years for The Proper Officer i.e. Director of Resources to ‘approve’ any budget or amendment to ensure that the figures add up.

    It is quite obvious that Coalition plans do not add up, or require unachieveable cuts. Anyone looking at the figures we have knows that even given the growth and therefore revenue assumptions the proposals endeavour to hide tax and/or borrowing increases. As Giles points out Labour would love to have those exposed and that maybe why Osborne is resisting.

  • jedibeeftrix 26th Jun '14 - 7:18pm

    It is never going to happen because Tory election hope rest on two thing:
    1. EdM is not seen as possessing the gravitas to be a prime minister of great britain, and that is an important factor in voter intentions
    2. Labour is not judged to be as economically competent as the Tories

    They will not want to threaten #2 by having the OBR turn around and say; “the sums add up”.

    There is a whole realm beyond this, where the electorate may or may not choose to agree with the direction of a labour party that wants to start spending (and taxing) again, but it starts with the simple propisition; do you trust the two Ed’s not to screw things up again.

    That is powerful, and it was the same argument in the 90’s which is why it was one of Brown’s masterstrokes to make the BoE independent of the government. It said; you don’t have to worry about that any more.

  • paul barker 26th Jun '14 - 8:03pm

    I think this brings up a much wider problem, that of The “Social Sciences” in general, they exclude the possibility of valid experiment & are thus Pseudoscience. Adding Maths as Economics does actually makes it worse, adding another layer of self-deception. Governments, like Businesses have to try to make the figures add up & they have to make predictions but they need to remind us at all times that people are essentially unpredictable & that Economic Plans are intelligent guesses at best.
    Anything that adds to the aura of “Objectivity” around Public Life is a move towards Irrationality.

  • “It has been a requirement in local government for many years for The Proper Officer i.e. Director of Resources to ‘approve’ any budget or amendment to ensure that the figures add up.”

    But not to approve or disapprove of party policies during an election campaign.

  • David Evershed 26th Jun '14 - 9:08pm

    The OBR can only be expected to make its best effort to estimate the impact on the deficit of manifesto policies.

    The estimates will have a wide range of potential error but it is better to make a stab at quantifying manifestos than no estimate at all or a biased quote by the parties.

  • YES YES YES

    transparency = good

    Plus it will show we’re the party not just vote grabbing but being sensible with our economy whilst being fair to society

  • Jenny Barnes 27th Jun '14 - 8:35am

    paul ” The “Social Sciences” in general, they exclude the possibility of valid experiment ”

    I don’t think you understand what you’re talking about. There are several, quite famous, social science experiments: Millgram, Stanford Prison; there are also multiple examples of different behaviours resulting from different economic policies. Social science is clearly more difficult to come to firm conclusions because it’s far more difficult to do exactly repeatable experiments, but there are many quite robust conclusions from economics, sociology, psychology and political science that are widely accepted. You may not like them, you might contest them, but that doesn’t mean they aren’t there. Plenty of people think the theory of evolution is untrue – so that makes biology pseudo science?

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