We thought we were getting tax cuts in the Budget, but it looks like the IMF doom-mongers have got to Jeremy Hunt
Most of the gloom seems to stem from Pierre-Olivier Gourinchas, the IMF’s chief bean-counter
JEREMY Hunt has gone all Eeyore again on tax cuts.
He spent January breaking all usual pre-Budget norms by talking up the prospects of more giveaways in five weeks’ time – but now the Chancellor is doing his trapped wind face again at our economic outlook.
I just hope this is a bit of political game-playing rather than a bad case of the three letter acronyms.
Whispered tones are back for the hallowed Office of Budget Responsibility, which appears to actually run the country.
While Hunt had £35billion to play with in the Autumn, word is the OBR is, so far, forecasting him just £14billion of headroom this time.
That comes hot on the heels of the International Monetary Fund, which ordered him this week to spend more money on the NHS rather than further ease the biggest tax burden since the Second World War.
And once again the global watchdog downgraded its predictions for UK growth. But is listening to this lot just a mugs’ game?
Last year the IMF said the UK would be an outlier by falling into recession. It didn’t happen, we grew by 0.5 per cent instead.
Reviewing all 24 forecasts on UK growth made by the IMF since April 2015, every single one of them was wrong.
After Brexit they were much gloomier than reality, just as after Covid they woefully underestimated how quickly the UK would bounce back.
For 2022 they reckoned growth would bump around the three per cent mark. This week they have revised that up to 4.1.
Once again the global watchdog downgraded its predictions for UK growth. But is listening to this lot just a mugs’ game?
Harry Cole
Most of the gloom seems to stem from Pierre-Olivier Gourinchas, the IMF’s chief bean-counter.
No prizes for guessing he’s a Brexit-hating Frenchman who warned his 300,000 countrymen would flee London as a result of the vote.
Another prediction he cocked up.
He was once named France’s Young Economist of the Year . . . perhaps they would like him back?
Instead he sits stateside with his broken crystal ball, while his own country teeters on civil disorder with angry farmers blockading Paris in a bid to starve out the elites like him.
But the IMF are far from alone. Closer to home we have our own Bank of England to get things wrong.
In 2022 there were days of headlines from their warning that we were facing the longest recession since the 1920s. But it didn’t happen.
The damage was done
In November the Bank said inflation will not return to its target of two per cent until 2025.
Today it said the target would be touched by this April.
Three problems – arrogance, groupthink and left-wing ideology. There is very little outside influence on their forecasts
Douglas McWilliams
And not a hint of contrition from the Office of National Statistics after their spectacular concession that UK PLC’s Covid recovery was far quicker than any neighbour.
But not before the idea was allowed to take hold, pumped out by funereal BBC presenters day after day, that we were some sort of sick-man global outlier.
With the flick of a pen, an entire narrative of decline that lasted more than two years was quietly rewritten.
But the damage was done. And the BBC merely made a small update to their autocratic website before swiftly moving on to talk down Britain in some other way.
Given the pessimists like graphs comparing us to other countries, hats off to Bloomberg, who this week revealed we actually ARE the worst in the G7 at something: making economic predictions.
But why do these official bodies keep getting their forecasts wrong?
Douglas McWilliams of the Growth Commission tells me: “Three problems – arrogance, groupthink and left-wing ideology. There is very little outside influence on their forecasts.”
He blames a revolving door between the Treasury, left-wing think tanks, regulators and statistics bodies for the woes.
“You would not expect civil servants, either domestic or international, to have much commercial nous and this lack of real-world experience means their predictions have an ivory tower appearance.”
Instead of seeing the potential of tax cuts or major reforms as a way of unleashing growth, says Douglas, “whenever you talk to them you get very little sense that they understand the damage done by high taxes and over-regulation.”
But while it’s fun to laugh at Predictive Pierre, the crappest clairvoyant in the club, these aren’t just numbers on a spreadsheet to sneer at on the Today programme.
Pessimism has massive consequences, not just for consumers but investors.
If we all talk ourselves into believing the economy is in the toilet, who can be surprised when people stop spending and investment decisions are delayed or simply abandoned.
Given their track record, the last people Hunt should be listening to is the IMF. And as for the OBR?
I bet you they find a bit more cash down the sofa in time for that pre-election giveaway after all.
RISHI’S PLAYING HAPPY(ISH) FAMILIES
BIG game of happy families tonight as Rishi Sunak hosted all 349 Tory MPs at Leicester Square’s five-star Londoner Hotel – even the ones who hate him.
“I’m glad so many of you can join me for dinner on Thursday night . . . Or as I call it, the first meal of the week”, the PM joked over his much-discussed fasting habit.
But I hear the star of the evening was not Sunak but no-nonsense radio presenter Nick Ferrari.
The one-man focus group gave the struggling Conservatives some brutal home truths about where his army of callers think they are going wrong, and what chances they had to turn things around.
Meanwhile, is Rishi starting to look over his shoulder at Lord Cameron?
MPs complain that they’ve asked Dave to speak at their own association dinners, only to be told he is not allowed.
Surely the PM isn’t worried about his predecessor rekindling his status as darling of the membership?
He’s already made one comeback…
HOW off-the-cuff was Rachel Reeves’s U-turn to throw Labour behind scrapping the cap on bankers’ bonuses?
Despite slamming the Tories just four months ago for lifting restrictions on filthy-rich financiers, the Shadow Chancellor surprised even the Shadow Cabinet this week with her latest attempt to woo the City.
And red faces are due on the February 6 – next Tuesday – as Labour had already planted a question criticising Jeremy Hunt over scrapping the cap at Treasury Commons questions that day.
TO be fair to the Bank of England, at least it is reviewing its own dire record at predictions.
There was outrage at its failure to spot the painful bout of inflation that has crippled wallets since the pandemic.
So an ex-US central banker was drafted in to conduct a warts-and-all probe.
I hear the bank is currently dotting the i’s and crossing the t’s on Ben Bernanke’s findings, that could be published within weeks.