Charlie Bean, former deputy governor of the Bank of England, cautioned against hasty fiscal cuts by the chancellor aimed at achieving long-term targets. As the Office for Budget Responsibility (OBR) issued weaker forecasts, Rachel Reeves planned spending reductions, including cuts to disability benefits. Bean criticized this reactive approach, highlighting the unpredictable nature of OBR forecasts. He advised waiting instead of making immediate policy changes to align with forecasts. Gemma Tetlow emphasized the potential negative backlash from bond investors if the chancellor doesn't clearly commit to fiscal balance.
"We've got ourselves into a frankly pretty ridiculous position where we're doing fiscal fine-tuning to control the OBR forecast five years ahead," Bean told an event hosted by the Resolution Foundation thinktank on Monday.
"I think we want to get away from this idea that we continually have to be neurotically changing taxes and spending to try and control this OBR forecast so that it's hitting our target," said Bean.
#fiscal-policy #budget-cuts #office-for-budget-responsibility #economic-forecasts #government-spending
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