The head of the Office for Budget Responsibility (OBR) has been forced to defend the independent watchdog’s GDP revisions to MPs.
The OBR recently downgraded its estimate for the UK’s 2011 GDP to 0.9%, down from its previous estimate of 1.7%. Its predictions for growth to 2014, inflation and unemployment were also revised for the worse.
Robert Chote, the chairman of the OBR, told the Treasury Select Committee that the revisions were based on “accumulating” evidence that had been gathered since its last estimate in March.
Chote explained more recent economic data suggests productivity growth and output growth remained particularly weak after the end of the recession in 2009. He added that it still unclear exactly why productivity growth is weak.
“The decision to change is based on the evidence that has come in,” he told MPs. “The puzzle is [to] try to explain why the evidence shows what the evidence does.”
Committee members levelled a series of criticisms at the OBR. David Ruffley claimed the organisation’s forecasts had been “horribly wrong”, while Pat McFadden asked what the point of the watchdog is if its figures are open to such drastic revisions.
Chote said: “Just to say ’this is very difficult and history changes therefore let’s not look out of the windscreen when we are driving ahead’, I think, would be something of a mistake.”
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