Alistair Darling and the Treasury have opportunistically used economic uncertainty to avoid providing sufficient detail about how they plan to cut the UK's £178 billion deficit.
Delivering a damning verdict on December's Pre-Budget Report, the Labour-dominated All Party Treasury Committee said that all of its expert witnesses had contradicted the Treasury's claim that it had provided sufficient information on debt-cutting strategy and insisted that future budgets should spell out where the axe would fall.
In the PBR, Darling pledged to halve the deficit over the next four years but did not say how this would be achieved, citing too much uncertainty in the economy as his justification. As a result, the Treasury has have refused to publish the assumptions backing their forecasts.
But this wasn't good enough for the Committee which called for greater clarity and “sooner rather than later” in its report. "There is a sense that the Treasury are using uncertainty to suit themselves," the MPs complained. "Despite substantial uncertainties they still produce some forecasts out to 2014-15 and illustrative projections out to 2017-18. We can see no good reason for the Treasury failing to produce illustrative figures for future expenditure.
"The Treasury use what they describe as cautious assumptions in the public finances forecasts. Some economists consider the structural deficit forecast is overly optimistic, many are concerned about the large uncertainties surrounding this forecast in particular and some doubt whether sufficient attention has been given to the structural deficit existing before the recession. Future Budgets and PBRs should attempt to quantify the downside risks around the structural deficit forecast."
A Treasury spokesman said: "The PBR set out a clear plan to halve the deficit in four years, while protecting the most important frontline services. Departmental budgets are set for the next financial year but, given the continued uncertainty in the global economy, to fix each department's budget now, for the next five years, is neither necessary nor sensible."
But this did not deflect criticism. "The Committee sees no good reason for the Treasury failing to produce more detailed illustrative figures for future expenditure, at least the split between Departmental Expenditure Limits and Annually Managed Expenditure," said Treasury Committee Chairman John McFall. "We consider clarity, even if it is clarity about the degree of uncertainty surrounding the forecasts, is essential to strengthening this crucial credibility."
Philip Hammond, shadow chief secretary to the Treasury, said: "This report from the Labour-dominated Treasury Committee is yet more evidence that Gordon Brown's deficit reduction plan entirely lacks credibility. The Government urgently needs to listen to these warnings, show some leadership, and set out a credible plan. We cannot go on like this, with an irresponsible failure to get a grip on our record deficit, which is undermining international confidence in the UK. This will lead to higher mortgage costs and higher borrowing costs – choking off the recovery and the creation of new jobs the country so desperately needs."
Links:
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