In defence of 'plogs'
It is fair to say that I would not have imagined myself writing a post in defence of the Office for Budget Responsibility. Nevertheless, here I find myself (sort of). That is not to say I intend to offer any excuses for the OBR’s worryingly poor forecasting record for UK economic output, which have been used all too frequently as a fig-leaf to cover a litany of equally poor policy decisions. Instead I want to defend Robert Chote and his team from a particular charge levelled at them by the FT’s Chris Giles last week. In an article entitled “ How to ‘plog’ the hole in our awful public finances ” Giles writes: “Had the OBR assumed significant spare capacity now alongside extremely weak growth in the economy’s potential output, it could combine a lacklustre forecast for output growth without the assumption that spare capacity would still exist in 2017-18. The benefit would be a logical and consistent forecast, but the assumptions would come at a cost: the OBR ...