The former Labor leader's economic plans were hailed as having the potential to “boost the long-term potential of the economy”. growth rate' Photo: Jonathan Brady/PA Wire
The head of economic forecasting at the government's Budget Oversight Committee said Jeremy Corbyn's plan to increase borrowing by £250 billion could potentially “provide a significant boost” to economic growth. .
Scott Bowman made these comments in 2017, shortly before joining the Office for Budget Responsibility (OBR), where he now heads the economics department.
Set up by George Osborne in 2010, the OBR provides independent forecasts to guide major government financial events, such as the budget.
Although supporters of the watchdog argue that it plays an important role in scrutinizing economic decision-making, critics have criticized it for making inaccurate forecasts and have argued that it underestimates the positive effects of such measures , like tax cuts.
In May 2017, Mr Bowman, then an economist at Capital Economics, carried out an analysis of the borrowing plans contained in Mr Corbyn's election manifesto that year.
The then leader of the Labor Party committed to borrowing an additional £250 billion over 10 years. The manifesto included promises such as the nationalization of water and rail companies, and the return of parts of the British energy industry to public ownership.
In comments published at the time by Pound Sterling Live, Mr Bowman said, that Mr Corbyn's policies would “have far less of a burden on the economy over the next five years” than the government's plans.
Mr Bowman said Labour's plan aimed to balance day-to-day spending with total income in five years, will allow fiscal policy to be relaxed.
“This could provide a significant boost to GDP growth, as the OBR Rule of Thumb suggests that 1 per cent of GDP on investment spending increases GDP growth by 1 per cent. And it could also boost the economy's long-term potential growth rate,” he said.
However, Mr Bowman warned that Labour's spending plans “could lead to higher long-term interest rates.”
>< p>According to LinkedIn, the economist joined the OBR three months after the analysis.
OBR 'routinely gets its forecasts wrong'
In February, Liz Truss, the former prime minister, criticized the OBR's forecasting process, saying it relied on “static modeling” which “tends to underestimate the benefits of low taxes and supply-side reforms to economic growth and overestimate the benefits of government spending.”
“This inevitably puts pressure on higher tax and higher spending – hence the inexorable tax rises we are now seeing,” she said.
Greg Smith MP Conservative Party member for Buckingham, said Mr Bowman's 2017 analysis provided “even more evidence that the OBR is not fit for purpose.”
“Not only were they routinely wrong in their forecasts, but now “We are seeing evidence that key figures are indiscriminately claiming that £250bn of extra debt will be an economic stimulus, which is clearly not true,” he said.
The OBR and Mr Bowman have been contacted for receiving comments.
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