The FT has reported this morning:
The fiscal fate of Sir Keir Starmer's government rests on a decision by a group of largely anonymous civil servants about an economic variable that the UK is finding harder than ever to measure and fiendishly difficult to forecast.
The scale of the hole in the public finances — to be spelled out in the Budget on November 26 — will be heavily influenced by judgments from the Office for Budget Responsibility about productivity.
Economists, who have long accused the fiscal watchdog of being too optimistic, predict that the OBR will downgrade its productivity forecast at the Budget. If it does, chancellor Rachel Reeves will be forced into steep tax rises.
This is absurd. It is not reality that will dictate the budget. Nor will need. It won't even be possibility. And actual resources available to be used won't come into the equation. Only guesswork will. We will get austerity (almost inevitably) because some almost unknown people think that the economy is weak, and rather than do anything about it, they would prefer to dictate policy that punishes us in the present so that the economic downside that they think might happen in the future will, for certain, be delivered.
As I have explained in my quantum economics series, turning the future into the present in a deterministic way, as Newtonian economic thinking does, is the issue here. The pretence (and it is no more than that) that these people know what is happening will dictate what happens now, even though in reality the future is not deterministic, but is uncertain, or to put it another way, unknown.
What we need instead, as I noted yesterday, is economic thinking that (and I have edited this slightly):
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Aims for robustness, but not precision. Instead of aiming for precise fiscal targets, policy should be designed to work under a range of scenarios. It is better to be roughly right than precisely wrong.
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Emphasises the importance of automatic stabilisers. This would mean strengthening benefits, emphasising progressive taxes, and public investment that expands when the economy weakens and contracts when it strengthens. These adjust automatically, without relying on forecasts.
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Focuses on flexibility. Budgets should be allowed to change as reality unfolds. This means that rigid fiscal rules should be scrapped and that plans must adapt.
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Highlights resilience. Investment should be made in systems that can withstand shocks: renewable energy, public health, and social safety nets. If the future is unknowable (and it is), it is essential to build key strengths in areas where need is known rather than gamble on forecasts.
This is what good economic policy will look like. Instead, Rachel Reeves will gamble our well-being on the opinions of a bunch of (no doubt) Oxford PPEs, like her, whose opinions are entirely predictable and almost certainly antisocial, or they would not be in the jobs that they have.
I make the point for good reason. I am not discussing quantum thinking as applied to economics in the abstract: I am doing so to suggest real change.
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Thank you for a disturbingly relevant article.
Might it be that a deep., but unstated, economic purpose of Austerity/Neoliberaralism is parasitism with the regular citizenry and their children as the victims?
Might the ditto political purpose be plutocratic oligarchy?
Might it be that only those who are obedient to Austerity/Neoliberalism are promoted to positions of effective power in the Civil Service, prominent political parties and much of the main stream medis etc?
Might the subversion of mass education be a significant tool of Austerity/Beoliberalism?
Might two of the “drivers” of those with power, be the retention/extension of power and position plus concerns about the retention or advancement of status
We have had the OBR for more than 15 years so there is plenty of material to analyse how well (or not) its predictions have matched the actual outturn, to see if there are systematic errors, and to try to correct their approach. Is there published research?
I have not seen it recently. When it was done a few years ago the forecasts were always grossly out – because they assumed reversion to the mean.
To me, I conclude that this means they serve no useful purpose –> they are a waste of resources –> they should be removed / disbanded. There would be a saving at least.
I am not sure I follow you.
Might you be less cryptic?
I seemed to recall that the Health and safety act was intitial a response to the deaths of workers on building sites due to poor safety measures being present. The final HSA was then given to civil servants in the main had little it any experience of working on a building site or high rise block. The net result was that instead of sweeping up the yearly yield of conkers from the school where I worked I had to organize the felling of the tree due to Health and Safety issues. The fact that it had being growing there for almost as long as the school and formed part of it’s logo was incidental. A number of other oxygen given trees receive a similar fate or pruning to reduce an potential chance that a pupil could swing on a brach or climb it and fall and injure themselves. As a result in the following year we had to purchase sail shelters and small covered huts to offer shade for the pupils that in the passedd was provided for free by the trees. All because the sensible HSA was given to civil servents to formulate into a working document. I wonder what this lot will see as the answer?
The fundamental question is how can you generate income to invest when you are still practicing austerity of the government you replaced? And when you also subscribe to the same self imposed limitations as the previous lot?
It makes no sense.
Rachel is reported as telling the cabinet ” we must live within our means and rising borrowing costs are putting pressure on public finances”.
Even deeper austerity on the way with growth stymied, crumbling schools etc. Continuing to promote the little trump.
But Rachel will find the money to continue paying banks interest on their regulatory deposits, whilst the net NHS funding will be reduced as result of the new PFI contracts for health hubs.
The inherent logic of the OBR seems to be that we can’t defend ourselves against a foreign power, a raging virus, the implication of AI or the collapse of the planetary eco-system because of the need to follow the fiscal rules.
Of course we need fiscal rules and budget responsibility but when the fiscal rules are in direct opposition to the existential interests of the population then the fiscal rules have to change.
The production of the means of survival precedes the creation of money, not the reverse. Ten monetarists stranded on a desert island would immediately set about providing shelter, food and water from what was available to them, they would not sit debating how they were going to pay for it.
We seem to be unable to develop monetary theory beyond a primitive level because of the need to protect individual rather than collective wealth.
Reminds me of the South American monkey trap where a small hole in a box allows the monkey to grasp a nut inside the box but not to remove it.
Rather than releasing the nut it seeks to retain what it has and is caught by the trapper.
The quantum economics ideology can be said to boil down to pointing out the sad fact that many UK people fail to use their imagination in examining all aspects of how we use money in our society.
Having just read George Monbiot’s latest article in the Guardian today, I cannot say that I am surprised. It is all extremely depressing.
Agreed.
I recommend the article. https://www.theguardian.com/commentisfree/2025/sep/11/tories-rightwing-junktanks-no-10-government-civil-servants
Two articles in the Guardian today suggest that maybe – just maybe – the concepts of MMT and the rejection of neoliberal dogma are getting through.
It also highlights the failings of the Labour government to get back to what most would consider traditional Labour policies or values.
George Monbiot https://www.theguardian.com/commentisfree/2025/sep/11/tories-rightwing-junktanks-no-10-government-civil-servants?CMP=Share_iOSApp_Other
Larry Elliott. https://www.theguardian.com/commentisfree/2025/sep/11/france-rachel-reeves-bond-market-britain-labour-economic-orthodoxy?CMP=Share_iOSApp_Other
You need to get halfway through Larry Elliott’s article for the emergence of some MMT-type thinking.
Larry’s was good
I just told him so
Very good notions – ‘stabilising’ spend, and ‘resilience’ spend – it could be something you might possibly imagine her saying. On the other hand she also thinks all public spending is ‘thrown down the black hole’ so maybe not.
And getting her to talk about real things and not just financial aggregates . Real numbers of children to be lifted out of poverty, real numbers of young people able to afford to rent or buy accommodation, real number of unemployed newly qualified doctors and nurses employed .
And maybe a recognition that some spending pays for itself – and contributes to ‘growth’.
All the ‘learned discussion’ on BBC is premised on the ‘inevitable’ ‘difficult choices’ – that spending has to be cut (‘welfare reform’ the most used phrase) and/or taxes on ordinary people raised.
As Jonathan Cook quoted yesterday ‘if elections changed anything they wouldn’t be allowed’ – we are seeing this played out before our very eyes.
As well as the Monbiot article about Liz Truss’ advisors spreading their message to the government,there’s also a Larry Elliott article in the ‘Guardian’ urging Reeves to ignore the ‘bond vigilantes’
The idea of an alternative to neoliberal economics is being made more frequently in the ” Guardian”.Sadly,even with a change of leader and/or Chancellor,I can’t see LINO changing direction .Streeting as PM ?
LINO needs to become
Extinct.
It shouldn’t have been a missing words competition.
There was not much to disagree with Larry Elliott’s post today , other than Labour is a centre left party?
Maybe they could build houses for limited profit? Maybe stop the free market ideology and make sure those investments accrued over time are rewarded to both government and third party investors.? Certainly not the PFI model! But a solid investment for our future.
With regards to our budget? I’ve not seen strong inward investment for such a long time!
Maybe that’s where we stop markets dictating and grow ourselves? Maybe a government worthy and a government not entrenched in extraction.
I have asked if he wants to do a podcast on this
Trying to find a link to their website, but failed; but Faceache (as a friend calls it: sorry!) has this from Channel 4 Forecast, with Zack Polanski ‘on message’
https://www.facebook.com/share/v/1FMVFBN2iH/
Finally someone with ability to speak with reason! This is a man that needs to , not fight but deal with the Ferage pandemic.
Countering is far greater than arguing. Diplomacy is not arguing, but it should never have been Mandleson!
Apologies that I do rant a little…I’ve never been so ashamed of any party other than the one that I have followed. Hard times!