I have warned, successively, that the Budget forecasts on tax revenue growth were ludicrously high both for this year and for several to come. I also suggested that the OBR was discredited by endorsing them. As the table below shows, I did the maths to show why that had to be the case (it wasn't hard to do). And now, as the FT reports:
Britain’s economic recovery has generated far less tax revenue than forecast, raising the prospect of even deeper spending cuts after the general election to balance the budget.
The latest blow to the public finances was an admission from the Office of Budget Responsibility on Monday that income tax receipts – the biggest single source of government revenue – are likely to fall short of government targets this year, despite record levels of employment.
I could just declare that as 1 to me and 0 to Robert Chote at the office for Budget Responsibility, but that would be petty when the issue is so important.
Three immediate issues follow from this. The first is that the quality of Treasury forecasting is dire. No one in their right minds could have believed the levels of growth forecast in March 2014 as shown in this table, the data for which is taken straight from the March 2014 budget with my extrapolation of growth rates added:
It wasn't just growth in tax revenues that was forecast, it was growth way beyond any underlying level of economic increase in activity that was suggested was going to happen this year, and that was always utterly implausible.
Second, we have to consider the possibility that the Treasury just lied when putting forward these growth projections. They are so ridiculous that has to be the best possible explanation for them.
And we have to the consider that the OBR may have been complicit in this - because if it was truly independent it should have been flagging up how unlikely this revenue growth was in March, and not now.
And what does it all mean? This list can be almost as long as you like. I'll keep it shortish.
First, the budget deficit this year will be bigger than forecast.
Second, as the rate of income tax growth forecast for this year continues virtually unabated according to this schedule for years to come, all future years are also wildly overstated so that likely budget deficits in those years are also wildly understated by George Osborne.
Third, that means that all Osborne's economic claims are shot to pieces.
Fourthly, that means that claim that there will be a balanced budget on this basis in the next parliament is not just ridiculous; it's as likely as George Osborne being the next Dr Who.
And that means, fifthly, that David Cameron's promises of tax cuts are just pure propaganda as the chance they will occur is s close to zero given that a budget surplus is their supposed pre-condition . That means that they should be completely dismissed as the daydreams of a pure fantasist.
Sixth, one has to speculate on why the OBR said this after Tory party conference when the issue was apparent before it. Again, OBR independence and / or competence are in question.
Seventh, why Labour is committing to these numbers is open to very real question.
Eighth, the need for a real alternative economic policy and not just a bundle of lies is now even more obviously necessary. But what chance of that, from any of the mainstream parties?
No wonder people are disenchanted with politicians.