The Office for Budget Responsibility’s catalogue of forecasting fun includes a host of goodies. For example, take this one on interest rates:
We have assumed that short-term and long-term interest rates move in line with market expectations. Rates used in this forecast are the average for the 10 working days ending 25 May.
Short-term interest rates are defined as the 3-month sterling interbank rate (LIBOR).
We recognise that this can produce a possible inconsistency in the case of a pre-Budget forecast. Market expectations will reflect predictions of the future policy of the Monetary Policy Committee (MPC), but those policies in turn may be affected by changes in fiscal policy. Thus market prices already reflect expectations about changes in fiscal policy and may be more appropriate for the Budget forecast than for the pre-Budget forecast. To the extent that this inconsistency is significant the short-term pre-Budget forecast for activity may be biased upwards, with consequential effects for the public finances.
So, in effect, they abandon forecasting altogether in the first instance, and then say that this may well be an inappropriate thing to do, but propose to take no action about it.
Now call me old fashioned if you like, but that sounds like irresponsibility to me. And bad forecasting too. let alone bad economics to build a feedback loop into your system from the outset. And these are the people Osborne has put faith in?