Examination of Witnesses (Questions 1-91)
Robert Chote. Professor Stephen Nickell. Graham Parker
26 December 2010
Q1 Chair: Thank you very much
for coming before us this afternoon. We have a number of questions
we'd like to put to you. No doubt this will be the first of many
such exchanges, Mr Chote.
The first question I'd like to ask you is about
the savings ratio. The Chancellor said that the savings ratio
will return to its average before the recession, but that is not
actually what you have forecast, is it? You have the savings ratio
falling sharply and then staying very low.
Robert Chote: Yes, the developments
in the savings ratio essentially reflect some of the data that
we've had since the last forecast, in the sense that consumption
has been somewhat higher than was originally anticipated, and
the measure of household income has been revised down, partly
because of new news on unearned income, which tends to be one
of the more erratic elements in this anyway. You're starting off
with a position where the saving ratio is lower than in the unpublished
forecast that the OBR had in June, so you're talking about a little
over 3%, rather than about something above 7%.
In terms of the averages, it depends, as ever
with these things, on what period you're looking at this over.
Over a longer period, the rate is some way below the average.
That, in part, reflects the fact that you obviously have a period
with a higher saving rate, associated with high inflation in the
1970s and 1980s. It depends whether your period covers that or
a later period as to whether you think it is high or low compared
to the average.
Q2 Chair: Why don't you give us
the last decade, or even couple of decades, since I'm sure you've
got that in front of you?
Robert Chote: I don't have it
in front of me. Six and a half would be around—
Chair: Yes, that's what I remember it
as—around six.
Robert Chote: That would be over
the longer period. If you take a shorter span, it would be less.
Q3 Chair: You've got it written
in at three and a half for five years—over the whole period—haven't
you? So it's not moving back towards its average before the recession,
is it?
Robert Chote: It's reflecting
the news we've had in recent days, and it's broadly stable at
that point.
Q4 Chair: It's staying at just
over half. What's more, it's not forecast to go up much either.
The reason you're giving for its fall might explain year one,
but you're now saying that that will be perpetuated through forecast.
Robert Chote: We're saying that
that's our central expectation, but if you look at the data revisions
that we've had since June and at how much impact they have had,
it wouldn't be at all surprising to see further data revisions
having quite an impact on this number as well. It is a residual
in terms of the calculation, and it does tend to bounce around
if you're looking back at what has happened in the past or if
you're thinking about how it might evolve in the future.
Q5 Chair: The higher consumption
must therefore be contributing to the somewhat better growth performance?
Robert Chote: Looking into the
immediate past and at what's changed in the evolution of the data,
that's right. If you look at that forecast, we take a slightly
less "go-ey" view of consumption growth going forward,
and that reflects the fact that we have a somewhat weaker forecast
for household disposable income growth than we had in June, hence
the relatively flat path going forward.
Q6 Chair: Don't you find it a
bit worrying that we might find ourselves living in a country
with a savings ratio stuck at 3 to 3.5%?
Robert Chote: I am not sure whether
I have a clear view in my mind about what the optimal saving ratio
is. I am certainly conscious of the fact that the sorts of revision
that we get to data, both on the income and on the consumption
side, can bounce this around quite a lot. I would not be surprised
if our view of recent history changes again, and that might well
have an impact on what we are forecasting in the future.
Q7 Chair: Will you drop your guard
just a tiny bit for a moment and say whether you feel relaxed
about a 3% savings ratio indefinitely?
Robert Chote: This is our central
forecast. It is consistent.
Q8 Chair: I am asking you not
whether you are relaxed about the accuracy of the forecast, but
whether you are relaxed about the long-run performance of the
economy.
Robert Chote: I am relaxed in
the sense that our central view is that this is consistent with
a sustained economic recovery, albeit one that is relatively weak
by the standards of past recessions. To that extent, it is not
a threat.
Q9 Chair: That is a straight bat.
It was the sort of thing that we got from Geoffrey Boycott; I
am very impressed.
I just want to ask one more question, the answer
to which we need purely for benchmarking purposes. There are some
additional costs as a result of creating the Office for Budget
Responsibility. There is a lot of consensus that we needed to
create the OBR. Professor Nickell said that it was worth a try
when he came before us in a confirmation hearing. To work out
whether it was worth a try down the line, we need to have an estimate
of the extra cost—not the gross cost of the organisation
but the net cost. You might not know that number off the top of
your head, but it would be helpful if you came back to the Committee
with what you think the extra net cost is of having the OBR. It
might be somewhat less than the £1.75 million figure that
is already in the public domain.
Robert Chote: I think that's probably
a question for the Treasury rather than for us, because it depends
on what it has left. There have been some people and posts transferred
from the Treasury to us, and we have some additional resource
to build on top of that. The question of what the additional cost
is would depend on what the Treasury is doing with the hole that
has been left after the people and the posts moved out, so that
is not a question to which I would have the data to give a full
answer.
Chair: I am sure that you can pass them
a message and we will get an answer between the two of you.
Q10 Jesse Norman: I want to look
at the section of the report where you talked about fiscal sustainability.
Towards the end—paragraph 5.46, 47 and 48—you say
some very interesting things. You say that you tried to illustrate
some of the pressures that may come to bear in future, and that
your fiscal sustainability reports will deal with that subject
in more depth. You are talking to representatives across the public
and private sectors to identify relevant work. Can you tell us
what kinds of issues that you have come across so far in thinking
about the evolution of the public finances? I obviously massively
welcome the transparency drive that this seems to represent, but
has anything been thrown up at the moment or is it too early?
Robert Chote: I am very impressed
that you have managed to come through the whole of the report
that we have written and go straight to the one that we will be
doing in the summer.
Jesse Norman: It is a very exciting prospect.
Robert Chote: It is. The long-term
report, which we aim to produce by June or July, will have a combination
of an expansion of the work on the flows—the paths of particular
revenue streams and spending streams looking ahead to the future—and
the balance sheet issues as well. You will have seen that the
ONS has done some work on wider measures of public sector debt.
We have whole Government accounts coming that will provide us
with more of a sense of what is going on with contingent liabilities.
The aim in what we are going to produce in June or July is to
get a story that involves both the flows and the stocks. There
is a danger with some of the headline stock measures that if you
apply the right discount rates, you can come up with as scary
a balance sheet number as you like. I think we will want to address
both those issues in parallel. Certainly, there is a lot of stuff
that the ONS has under way already that we will be able to build
upon.
Q11 Jesse Norman: What do you
think the major categories will be on the balance sheet side?
Robert Chote: The work that the
ONS has done to date, you've obviously got: an examination, in
addition to headline public sector net debt, of the implications
of the present value of future pension liabilities. That's an
important one. Then, contingent liabilities and private finance
initiatives. Some of those have been estimated in more or less
detail already.
There is of course the issue of the other side
of the balance sheet, which is the asset side. In the past, when
we've had measures of public sector net worth, which are an attempt
to do this, it has to be said that those are numbers that, even
when it started producing them, the Treasury wasn't particularly
confident there was a firm evidence base for. Therefore, they've
never been used as a policy target. I think one issue that we'll
also come out of this with is a view as to whether looking at
that variable is particularly helpful in future, or not.
Q12 Jesse Norman: In relation
to the private finance initiative, obviously this is a phrase
that covers a diversity of projects that have a different impact
on the balance sheet, many of which actually have quite different
risk characteristics from each other. Will you be, as it were,
risk-weighting those projects across the categories to get a sense
of how they actually affect the balance sheet?
Robert Chote: When we see what
the whole Government accounts material has. I don't know to what
extent they're going to break down the different categories of
potential contingent liabilities, for example; we'll see. That's
the work programme for beyond this forecast and the next one.
Q13 Jesse Norman: But is that
something you expect to do?
Robert Chote: If the data are
available, we will want to pull together as comprehensive a view
of the balance sheet as we can.
Q14 Jesse Norman: On the income
side, obviously, one of the things that would be a very important
long-term discovery would be further evidence for the thought
that services costs are essentially crowding out other costs on
the public sector income statement. Is that something you'd expect
to find?
Robert Chote: Sorry—service
costs?
Q15 Jesse Norman: Essentially,
the idea that the costs of public services are rising disproportionately
fast as a percentage of national spending.
Robert Chote: There's an issue
there—this arises in terms of the long-term debt profiles—of
what you assume to be unchanged policy as you move from the end
of that medium-term forecast into the longer-term one. What's
traditionally been done in the past is basically to assume that
as a share of GDP, public services spending essentially remains
constant into the future, and so too do the revenue streams. The
adjustment for demographics then produces spending pressures based
on the change in the proportion of the population that consumes
particular types of services, but you don't see those sorts of
effects in there. So, in a sense, whether policy responds in the
way that you're implying or not is the question, and whether you
actually include that in the baseline or not.
Another area that I think people at the IMF
and the EC would point to is whether, in areas like health cost,
pressures in addition to demographic pressures are an important
part of the story as well. If you look at some of the differences
in international comparisons between some people saying that there's
more or less of a problem, often it's the degree to which they
are, in addition to demographic factors, taking into account those
cost factors as well.
Q16 Jesse Norman: That's helpful.
So you'd be expecting to do some analysis of those factors as
well?
Robert Chote: Yes. One of the
things we will start to do is look at best practice in terms of
producing these long-term assessments from other countries. We've
got the CBO and a variety of other national long-term sustainability
analyses to look at, and those produced by international organisations.
I think one part of the exercise will be to see what's done best.
Obviously, we'll try to do it better, but it will be sensible
to learn lessons from who's doing interesting and informative
work in other countries.
Q17 Chair: So you are going to
write to a large number of people domestically and internationally
to seek responses?
Robert Chote: Well, we're looking
at the available data that are out there, so we're looking to
see what sort of work has been done and if we will need to follow
that up and see whether we need more information to see whether
this stuff is either replicable or producible. Then we'll pursue
that.
Q18 Chair: Are you going to invite
evidence, though, to come to you? May I suggest that you do so,
this being the first time that you've done this? It would be a
good idea to do so, don't you think?
Robert Chote: Absolutely. As I
said, once we've scoped out what is being done in this field already
and we can see where the areas for potential further improvements
are, then I think we can move on that.
Q19 Chair: You mentioned the discount
rate. What discount rate are you going to use?
Robert Chote: We haven't made
a judgment on that yet. This is for the report after the report
after this one.
Q20 Chair: And you think that
you'll be able to make a case for deviating from the Green Book?
Robert Chote: Well, I would imagine
that rather consistently with what we've done here, you'd want
to say that if you have different discount rates, you will end
up with different answers on that. You'd want to say how sensitive
particular estimates were to using those different discounts.
Q21 Chair: I don't really find
that an answer, Mr Chote. I was asking a pretty straight question,
which is—
Robert Chote: What am I going
to use as a discount rate in two reports' time?
Q22 Chair: Are you going to consider
deviating from the Green Book discount rate?
Robert Chote: As I say, we'll
sit down and we'll work out what we think the sensible discount
rate or rates are to inform that sort of analysis.
Q23 Chair: So the answer is that
you might.
Robert Chote: We might.
Q24 Jesse Norman: Excuse me Chair,
but if you're testing assumptions, that would be an important
assumption to test.
Robert Chote: Yes, exactly. This
is one reason why I think you have to be wary of coming up with
very large net present value estimates, because often they're
telling you as much about the discount rate as they are about
the underlying flows. That is why I, personally, think that it
is often more informative to look at what you expect to be the
change in the share of GDP, or in spending or what you're receiving
as revenue in these particular areas, rather than just coming
up with a large scary number by dividing by the number you first
thought of.
Q25 Mr Umunna: I want to ask you
about your overall GDP forecast, but first I want to ask a very
quick question about migration. Obviously, your forecasts were
produced while making certain assumptions in that regard. Can
I refer you to the statement that you make in paragraph 3.22?
You say that you've judged that there is "insufficient reason
to change our average net migration assumption of 140000 per year
from 2010." I presume from that that you don't really expect
net migration into the country to fall below 140,000 next year
or in the following years. Am I correct?
Robert Chote: We are certainly
not in the business of trying to predict net migration flows on
a year-by-year basis, so the question is: what is the sensible
medium-term assumption to make? From the ones that we've looked
at, we think that the ONS's lower migration scenario looks reasonable,
partly on the grounds that you might expect the opening of borders—particularly
for Germany—to A8 workers to have an impact, as well as
whatever happens on the domestic policy front. Given that we've
obviously had domestic policy announcements, on that basis it
doesn't seem to us that that is any reason to shift the assumption
that we are making.
Q26 Mr Umunna: It says that quite
clearly in the report. Would it be right to say therefore that
you don't particularly foresee net migration being impacted by
the immigration cap that has been announced?
Robert Chote: As I was saying,
on the basis of the likely impact of the immigration cap, as it
has been described, given where we're starting from as a migration
assumption, and given that the Government will be working off
a higher assumption and reducing it, it doesn't seem that there's
any reason at this stage to take our number down further. Obviously,
this policy is evolving over time, and the Government are going
to come back to look at channels other than the one they looked
at in the first place. This assumption is certainly not written
in stone, but it seems to be a reasonable one to stick with for
the time being.
What we have also done—reflecting the
fact that different people will have different views about how
likely this is—is to put in a ready reckoner. That explains
the impact of the number being 50,000 different in one direction
or another on population growth—the labour input, which
is important for our trend GDP growth view—and then, depending
on the other assumptions we make about the productivity of those
workers, how that feeds through to growth. We have the central
assumption we've made, and we've tried to set out what the likely
impact of a different assumption would be.
Q27 Mr Umunna: On growth generally—I
quite like the boxes and charts in your book—can I refer
you to box 3.5 on page 40, which I found quite interesting? If
you look at that box, it seems to show that over the first four
years of this recovery we're in, the growth is going to be only
a little lower than in the previous three recoveries, and that
is despite the fiscal tightening being huge in comparison. The
Government in the previous recovery were able to reduce interest
rates; obviously, the pedal is firmly on the floor as far as interest
rates are concerned at the moment. We have bank balance sheets
still in need of repair and credit conditions are still very difficult—we've
taken lots of evidence on that. We've also got individual households
who need to repair their balance sheets as well. In the light
of all those things, don't you think that your forecast—looking
at this box—is just a tad optimistic?
Robert Chote: No, it's a central
forecast—that is what we put in there. Of course, there
are other factors pointing in the other direction. The central
forecast combines our assessment of the net impact of that. So
you also have very loose monetary policy, a depreciated exchange
rate, and corporate and larger company balance sheets in a relatively
healthy condition as well. You have influences going in both directions,
but we still think, on balance, that you are looking at a somewhat
weaker recovery than we have seen in the previous three recoveries,
partly for the very reasons you mentioned.
Obviously, the exact figure you get for a four-year
comparison will depend. For the last recovery, in particular,
if 1992 had been a little worse, it would have been the last year
of the recession and the first four years of the recovery would
have looked stronger. I would make this as an illustration. You
wouldn't put an enormous amount of weight on the precise numbers,
but I think that the balance looks right to us. You have big
uncertainties and big factors pulling in both directions but a
sustained recovery. A relatively weak recovery by the standards
of past ones seems to be a central view, with large uncertainties—hence
the sensitivity analysis and the scenarios to inform people, if
they take a different view.
Q28 Mr Umunna: You have slightly
pre-empted my next question. I don't know if you've seen the written
evidence that has been submitted, but the chief economist at Barclays,
Simon Hayes, made the point that, particularly from 2012, your
forecast is reasonably optimistic. He says in his written evidence
that when there is a distinct gap between your forecast and those
of the consensus, he thinks it would be helpful if you identified
the key judgments that account for that gap. I think you have
already mentioned about four of those. Are there any other judgments
that might account for that gap?
Robert Chote: I think that we
have covered a fair number of them. The first point I would make
is that the consensus is, of course, not a consensus—it
is an average of a wide variety of views. Actually explaining
the difference between this forecast and an average of forecasts,
many of which are not fully articulated among the variables, is
a pretty difficult thing to do in the first place.
Given our assessment of the amount of spare
capacity at the moment, the expectation that you are going to
see a recovery that will close that less quickly—that is
that we will return to pre-recession levels of GDP more slowly
than in previous recoveries—looks, to us, to be a central
view, but there is huge uncertainty, and hence the modelling of
alternative growth rates and alternative output gaps to kick the
tyres of the fiscal sustainability assessment arising from those
forecasts.
Q29 Mr Umunna: Obviously, you
have upgraded your forecast for this year and downgraded it for
2011. Do you think that the stronger-than-expected growth in this
year reflects the tail end of the stimulus package that was put
in place by the previous Government?
Robert Chote: The primary factor
is probably the stock build and the fact that stock building has
proceeded more quickly than would hitherto have been anticipated.
As for how much weight you place precisely on stock numbers and
whether those numbers will look the same when you get to a blue
box in a couple of years, I would not stake one's life on that.
You also have the fact that the stock building has an alignment
and adjustment in there, so the ONS is also using the stock building
numbers partly to get the output measure and the expenditure measure
of GDP.
Our provisional view, on the information that
we have at the moment, is that it is probably to do primarily
with the stock building and the fact that you have also seen construction
activity particularly strong, and probably not sustainable at
the sort of rates of growth that we have seen in the recent past.
Q30 Chair: When you deviate a
lot from the average of outside forecasters and know that you
are going to do so at the time you write your report, would you
be prepared to consider producing in written form a short explanation
of that deviation?
Robert Chote: The problem is that
we know why we think what we think, but we don't know why the
average of other people do. We have tried to have a much longer
discussion in this report than you will have seen in previous
such publications of what has happened to independent forecasts
in the past.
Q31 Chair: I am not asking you
to read the minds of other people. I am asking you to say what
you think is your explanation for deviating a lot from the average
of others when that occurs—just as a matter of practice.
Robert Chote: As I say, we can
set out why we think what we think. There are individual forecasts
that you can compare.
Chair: I've heard that.
Robert Chote: The national institute,
for example, has a particular view on the pace of rebalancing.
We've said, because you have an alternative forecast, look at
that—you can identify the differences there. It is less
clear that you can do that for identifying the difference from
the average of 40 forecasts, not all of which contain full sets
of components of demand.
Chair: I've planted the thought. There
will be more exchanges later.
Q32 Michael Fallon: You've adjusted
your output gap forecast. How concerned are you that spare capacity
might degrade even quicker than expected, closing the gap even
earlier?
Robert Chote: It's clearly a risk.
The output gap is an extremely hard thing to measure at the best
of the times because you can't observe the potential of the economy
directly. As you've seen, we've pulled together all the evidence
that we can, in terms of using coincident indicators, so we are
not unduly reliant on revised GDP numbers, or GDP numbers that
are liable to revision.
We've come up with the estimate that we have.
There is clearly a range around that. For example, we are at 3.25,
and the IMF is saying possibly somewhere between 1.8 and 3.9,
which gives you a flavour of the uncertainty implied by different
methods of calculating these things. That's why we've included,
in chapter 5, a series of scenarios that imagines that the output
gap is different now from the level that was anticipated, or that
it closes more or less quickly. We also have a scenario that says
even if you are right about the output gap now, if you were to
have a particularly weak recovery and demand position, as you
say, you could end up affecting supply in that way as well. We've
tried to address those sorts of issues, but you are absolutely
right that this is not an easy thing to estimate, even several
years after the event, let alone at the time you're trying to
do it.
Q33 Michael Fallon: In chapter
3, you say: "A larger output gap…would imply greater
downward pressure on inflation. The reverse would also hold".
That doesn't really take us very far, does it? Do you have a view
of inflation expectations?
Robert Chote: We don't forecast
inflation expectations.
Q34 Michael Fallon: You don't
say much about inflation expectations in chapter 3, do you?
Robert Chote: No.
Q35 Michael Fallon: Why is that?
Robert Chote: It is not, I think,
particularly pertinent to that element of the forecast. You've
certainly got the Bank of England examining inflation expectations
to a considerable degree. You obviously have the inflation expectations
implied in financial markets, and you have survey estimates as
well. Those would all be taken into account from its point of
view, in terms of thinking about what some of the underlying inflation
dynamics would be. It is more important to it than in terms of
interpreting where you are from the output.
Q36 Michael Fallon: But shouldn't
your office have a view of inflation expectations?
Robert Chote: As to whether they
are too high or too low? We have a forecast for inflation, so
if the inflation expectations are higher than those, implicitly
we are presumably saying that they might be unduly pessimistic,
but there will be large uncertainties.
Q37 Michael Fallon: But inflation
expectations have a separate importance to inflation itself. It
would be nice to have a view. We haven't had many views this evening.
Robert Chote: Inflation expectations—as
in the financial markets, for example, where you actually have
them in prices in terms of gilt yields—are obviously reflected
in lots of parts of the forecasting material. To say whether they
are right or wrong, we have an inflation forecast. There are expectations
out there, and one can compare the two.
Q38 Michael Fallon: Do you think
the Bank's current assessment of inflation expectations is right
or not?
Robert Chote: To a degree it is
surveying and asking people what they expect inflation to be,
and taking the answer, so I presume that it is an accurate reflection,
from its point of view, of what inflation expectations are.
Q39Mr Ruffley: The forecast assumes that
sterling's fall since autumn 2007 will be pretty much locked in
for the next four years. I think it's fair to say that we are
talking about a devaluation-led export recovery to the extent
that one third or a quarter of growth will be delivered by exports.
What is your assessment of what happens to all that if the euro
weakens sharply?
Robert Chote: The exchange rate
assumption we use is uncovered interest parity, so there is not
a particular judgment about a view of the fundamental or fair
value for the exchange rate until we believe that there are any
tendencies. We are not making any sort of judgment on that.
Obviously, in terms of developments in the euro
area, that is one of the many risks and uncertainties that are
around, both in terms of the demand that you will see on the trade
side in the eurozone, and on currency movements. However, in terms
of having a forecast or assumption that you can use, it seems
to us that, of all the variety of unreliable alternatives on offer,
that is the best one and that is the one that we have put forward.
Q40 Mr Ruffley: I understand that,
and I understand that there are plenty of assumptions on foreign
currency that you could choose. However, we are in slightly different
territory now, aren't we, with the difficulties in the eurozone,
the Irish crisis and instability? What is your view on what will
happen to the euro? If it weakens, that is going to hit our exports,
yes?
Robert Chote: It depends on what
other currency movements are happening in the same place. If there
is a change in the dollar-euro exchange rate, for example, how
sterling is affected between those is not immediately obvious.
Clearly, however, as you rightly say, we are assuming that the
outlook for exports, for example, is partly driven by the sorts
of response that you have seen to the degree of depreciation that
we have had in the past, on a basis that is weighted for the importance
of different export markets for the UK. So, if that depreciation
advantage were to be reduced, over time we would expect that to
have an effect.
Q41 Mr Ruffley: Do you have any
concerns about weaker growth in the eurozone?
Robert Chote: If there were to
be weaker growth in the eurozone, you would be concerned that
that would weaken demand for UK exports. Clearly, it is very difficult
at this stage to predict quite how recent events will unfold and
the degree of impact that they will have on the real economy.
For example, if you look at the particular difficulties
that Ireland has had, which have been unfolding during the course
of our putting together the forecast, one issue with that crisis
has been the degree to which some of the trade effect has already
shown up in the trade performance with Ireland in the past. So
some of the bad news on the trade side is there already. There
will be other effects as well, of course, including the impact
on all of this on yields and the degree to which there is either
a general concern about risk aversion or more of an attempt to
identify safe havens. So, you could see the impact on yields going
in either direction. We have seen gilt yields rising relatively
recently. It is hard to identify how much of that is down to Ireland
specifically, how much is down to broader eurozone concerns and
how much is down to the way that people interpret the domestic
economy.
Q42 Mr Ruffley: I think that it
would be fair to say that some Members of this Committee think
that you have been pretty sanguine about the outlook for the eurozone.
Can I ask you a final question? It is a fast-moving picture now.
If there are any major developments that lead us to think that
growth will be sluggish in the eurozone and that that will have
an impact on the UK economy, will you revise your forecasts? If
so, what is the mechanism for refreshing and updating this document?
Robert Chote: We will be starting
with the process of preparing the next forecast in January, so
we don't have long to wait before we get under way again.
Q43 Andrea Leadsom: Professor
Nickell, as an Oxford professor and an ex-member of the Monetary
Policy Committee have you considered the possibility of the euro
collapsing as a currency? [Laughter.] Over dinner, perhaps.
Professor Nickell: I have to admit
that it is not something that I spend much time thinking about.
Of course, there is a possibility that it will collapse. At the
moment, however, it's not something to which I would assign a
very high probability.
Q44 Andrea Leadsom: If such a
scenario is not impossible, do you think that the OBR ought to
do a bit of blue-sky thinking about what would happen if the euro
should collapse or get into very severe difficulties? Perhaps
it might not collapse, but it might get into very severe difficulties.
Professor Nickell: The way to
think about that is that one might want to consider what would
happen if the eurozone does not grow very fast. It is quite dramatic
to say that the eurozone collapses, but there is obviously some
probability that growth in the eurozone is going to be very low.
Plainly, that would be part of our thinking when generating a
forecast. We would not consider, and I would not consider, that
to be the most likely outcome at the moment, but it is certainly
a possible outcome.
I think that, if developments over the coming
months move us in that kind of direction, it is perfectly possible
that we could look at that as a scenario—not specifically
on a collapse of the euro, but on very slow growth in the eurozone.
Q45 Andrea Leadsom: In your academic
career or your role on the MPC, have you ever looked at and evaluated—I
am sure you have—the success and failure of currency unions
through history?
Professor Nickell: I am afraid
I haven't, but I know lots of people who have. I think the general
consensus is that, sooner or later, they fail, for one reason
or another. That doesn't mean to say that it always happens, but
that is my understanding.
Q46 Andrea Leadsom: Mr Parker,
with your past role in the Treasury and the civil service, do
you think it would be right for the OBR as a new organisation
to be doing some analysis of thinking outside the box about these
impossible crisis situations, so that some work is prepared and
some sort of plan B can be put together, in relatively short order,
if we get ourselves into deep difficulty?
Graham Parker: As long as it's
not inconsistent with our terms of reference or charter—we
have got to keep out of policy issues. I don't see why, if we
thought there was a chance of an impact on the forecast, we shouldn't
start thinking about such issues. But I don't think it's for us
to set out what policy should be and so forth.
Q47 Andrea Leadsom: No, indeed.
But in your opinion, should the OBR be considering the implications
for its forecasts of some other crisis in the eurozone that would
affect the UK dramatically?
Graham Parker: Yes, if we thought
so. We clearly cannot look at every single possibility, but if
we thought that there was a significant possibility of something
happening, we should probably look at it, even if only to do a
scenario—it wouldn't necessarily be our central forecast.
We have already done a bit of that, so I don't see why we shouldn't
do a bit more.
Q48 Andrea Leadsom: So, Mr Chote,
is it your intention to look at forecasts, taking alternative
views other than the consensus market views on matters such as
inflation, trade and so on? Will you be taking your own view and
modelling the forecasts according to some potential alternative
scenarios in the future?
Robert Chote: That is one of the
innovations of this report. In addition to producing a central
forecast, we have identified and looked at, partly, the concerns
of other forecasters as to those areas where people might say
we can identify some scenarios—rather than just looking
at the sensitivity of growth being a little higher or a little
lower, or the output gap being a little bigger or a little smaller.
Such scenarios have to be illustrative—the world is not
going to turn out exactly like them, any more than it will turn
out exactly like the central forecast. Hence, the delayed rebalancing,
which for example we did here. It is quite possible for us to
think that a scenario based on difficulties in the eurozone would
be the sensible one to do, as long as it wouldn't simply lead
you to say, "If the eurozone was doing worse, exports would
do worse, therefore growth would be slightly slower." If
there was more of a story to tell than that, and it wasn't already
reflected in the world forecast—which we would take it on
board in what we are doing here—that would be a very sensible
thing to do.
Q49 Andrea Leadsom: What is your
personal view of what is likely to happen in the eurozone?
Mr Love: You have time to think about
it.
Robert Chote: We have a central
forecast, and our central forecast is that we are not assuming
a cataclysmic outcome for the eurozone in terms of the fate of
the currency union.
Q50 Andrea Leadsom: So, do you
rule that out?
Robert Chote: As Steve said, you
have to look at the history of currency unions in the past. In
the days when I had a responsibility to think about such things,
I used to write about the wisdom of the currency union that we
have—but that was in a previous life, and my responsibility
is no longer to recommend exchange rate regimes for this country
or for any others. As Steve said, history suggests that monetary
arrangements come and monetary arrangements go.
Q51 Andrea Leadsom: One last question.
Obviously the reason why I am pressing you for your opinions is
that it is interesting that this is the first time we have seen
the OBR in full flow. It is quite difficult to get a view out
of you, other than this forecast, which is taking a lot of consensus
forecast as its core data.
Robert Chote: The previous questioner
was saying that we were not close enough to the consensus; now
you are saying that we are too close to it. We have a central
forecast—there are at least 40 people canvassed by the Treasury
on a monthly basis, who come up with other forecasts as well.
Ours may agree with some or others of those, but we have to come
up with a central view and present it and explain it as clearly
as we can.
In addition, unlike with previous official forecast
documents, we have said, "There are different ways in which
things could turn out and let's explore the possibilities."
I hope that we are doing that, but I do not think that we should
be aiming to be either like or unlike the consensus for the sake
of it. Given that there is not a consensus—there is an average—it
is a different issue.
Professor Nickell: I do not think
that one should get too hung up on one side of something all the
time, such as the eurozone facing collapse, and so on. I read
quite recently that the Ifo index in Germany is at its highest
level for a very long time and that the general economy has never
looked so strong. So there are always things on one side and things
on the other side, and it behoves us not to get too carried away
in one direction or another.
Chair: You are certainly not taking that
risk this afternoon, if I may say so—and I mean that in
the plural.
Q52 John Cryer: I want to follow
on with a couple of questions about the euro. You mentioned the
strength of the German economy—I am not sure if that is
an argument for the survival of the euro or not.
The situation that we are in now was predicted
in 1974—you have started me off—by the MacDougall
report, which you are probably familiar with, with huge capital
shifts to the more vulnerable areas of any currency zone. So people
are looking at Ireland, Greece, Italy and Spain, but the danger
might come from Germany itself, because there is now enormous
public pressure in Germany to leave the euro on the basis that
it will have to bail out everybody else, which is fairly predictable.
Under those circumstances, and with ECOFIN now
talking about putting together a perpetual rescue package, which
George Osborne said he has got nothing to do with—but he
would say that, wouldn't he?—aren't we in a position in
which you should really be looking at the possibility of the euro
collapsing? Any of you can have a crack at that one.
Professor Nickell: I think I said
that the euro collapsing is such a strong thing—I would
be quite happy, if we felt that it was a real possibility and
a real concern, to have a scenario in our report that dealt with
the question of real weakness in the eurozone. Whether this weakness
is caused because of uncertainty and pressures that exist within
the euro—even if the euro is sustained—or whether
it comes about because the eurozone collapses, I do not think
that that is particularly important.
Q53 Mr Ruffley: Could you give
us a probability of the euro collapsing within the next 12 months,
just so that we are clear, because we are going around the houses?
What probability would you ascribe to the euro not existing in
its current form in 12 months' time?
Professor Nickell: Oh, 1.7.
[Interruption.] Subjective probability—
Chair: I am very surprised that it is
not 1.8. Perhaps that is the consensus. John was asking the question.
Q54 John Cryer: That is the most
original answer I have ever heard on this Committee. I want to
go back, briefly, to the possibility of the euro weakening again.
Is it likely, and what effect will that have—particularly
since you are forecasting a fairly level position on the UK's
share of export markets?
Professor Nickell: Am I stuck
with this?
Q55 Chair: The question you are
being asked is how sensitive is your forecast to variations in
some of your central assumptions, one of which is about the exchange
rate. It is a reasonable question, so why not answer it in that
form?
Robert Chote: It depends in part
on why the exchange rate has moved as it has.
Q56 Chair: That is what you have
to think through. You are paid to think about these things now.
Robert Chote: We can come back
to that if we end up doing a scenario in which we look at those
sorts of effects. If the situation gets worse, you would need
to take into account basically the sorts of factors that we have
outlined in the box on Ireland, because although it is not the
same situation, you would essentially be talking about a similar
mixture of factors. There is demand, meaning how strong demand
for UK exports in the eurozone will be. There is an exchange rate
issue. There are also gilt yields and how they will affect market
interest rates. There is also the possibility—I think you
will lead me to this point briefly—that there will be rescue
packages and, depending on how far the UK would be involved in
that, you would have to look at the extent to which that score
would matter for the public finances as well. There are an awful
lot of variables, so if you ended up with such a scenario you
would need to tell a story that looked at all those various dimensions.
Picking out one in the absence of another probably does not provide
a clear picture.
Q57 John Cryer: How ready do you
think we are for any growth in world trade, on the basis that
we have lost an awful lot of our manufacturing base over the past
30 or 40 years?
Robert Chote: Manufacturing is
not the only sector engaged in trade—
John Cryer: No, but it is a very big
part of world trade.
Robert Chote: It is an important
one. Our view of the potential performance of UK export markets
seems sensible, given the view that the IMF, for example, has
taken of world trade. You would expect UK export markets to grow
somewhat less than world trade, and you would expect UK exports
to grow somewhat less than growth in our export markets. We have
a chart of the UK's export market share, which essentially shows
some pick-up in the short term and then the resumption of a downward
trend, reflecting the growing importance of emerging market countries
in particular. It shows that the improvement we are expecting
in the short term does not look unrealistic, given the size of
the exchange rate effect we have had relatively recently. You
are talking about looking for very slightly more of a contribution
from net trade in this forecast, compared with what you saw in
the 1990s, for a rather larger depreciation. We are relying less
on net trade contribution per percentage point of depreciation
than you might think would be the case from the experience of
the 1990s, but there are big uncertainties around that.
Q58 Andrea Leadsom: I have a quick
question on the process. If the Chancellor were more concerned
about the prospects of a collapse in the eurozone, what would
he do to get that forecast modelled? Would he come to you and
ask you to do it, or does he have staff left who could do that
for him? In other words, if his central forecast is not necessarily
in line with yours, what can he do about that?
Robert Chote: He has many officials
in the Treasury whom I am sure he would task with doing scenario
analysis, telling them the questions he is interested in and the
OBR's view and asking whether they take a different view. The
shared model that we use is a tool that the Treasury can also
use. It still has many people for the time being who are able
to do that.
Q59 Andrea Leadsom: Do you think
he will still have the capacity to do that in future?
Robert Chote: Yes.
Q60 Andrea Leadsom: All the time?
Robert Chote: Obviously, how the
Treasury's resources are allocated is up to the Treasury, but
I am sure it would not wish to denude itself of the capacity to
answer those sorts of questions if the Chancellor were to ask
them.
Q61 Chair: The short answer to
our question, it seems, is that you have not done any sensitivity
analysis on sharp exchange rate fluctuations as a consequence
of instability in the eurozone.
Robert Chote: Not in the case
of the most recent example. We have looked at what seems to be
an appropriate response to the exchange rate movements that we
have had so far, based on the experience of past recoveries, but
we have not war-gamed particular scenarios for what happens if
the eurozone crumbles more or less quickly.
Q62 Chair: So there is no exchange
rate sensitivity analysis built into any of those fan charts.
Robert Chote: No, the fan charts
are based on past forecast errors. There is no subjective probability
distribution in them or skew inserted because of particular views
or risks.
Chair: I understand.
Mr Umunna: I was going to ask a similar
question, about the dependency of the forecast on sterling staying
low, but I don't think we will go more into that.
Q63 Mark Garnier: A very quick
question on your methodology: what is the difference between a
consensus and an average?
Robert Chote: A consensus implies
that lots of people agree on something; an average implies that
there may or may not be agreement, but you can still have an average.
There is a rather nice scatter chart on page 23, which shows the
existence of an average but not a consensus.
Q64 Mark Garnier: So when you
refer to a consensus, you are saying that, broadly speaking, everyone
agrees on x, y and z—whatever it happens to be.
Robert Chote: I am making the
point that when people talk about a consensus forecast, they do
so as though there is an articulated world view out there that
is the consensus forecast. Actually, there is an average of views—people
take different views on demand and supply in the economy and so
on.
Q65 Mark Garnier: It is useful
to know the difference, because I want to have a look at property
prices. You talk about the median of independent forecasters for
the next two calendar years, and about a 1.7% increase for the
fourth quarter of this year and a 1.4% decline next year. Who
are the independent forecasters?
Robert Chote: They are the 40
forecasters that the Treasury polls on a monthly basis. We refer
in chapter 2 to evolution in the average forecasts, and the dispersion
of forecasts. The Treasury goes out and asks people questions,
and one of the things that it asks them about is house prices.
We are looking at the distribution of those sets of expectations.
Q66 Mark Garnier: So there is
quite a wide distribution of people, and they are not the Halifax
and the usual run-of-the-mill forecasters on property prices.
They are genuinely very diverse.
Robert Chote: Yes, they are a
combination of City, academic and others.
Q67 Mark Garnier: There is a reason
why I ask that. The National Institute of Economic and Social
Research is predicting that, over the medium term, house prices
will be significantly weaker, and that house prices will fall
in real terms over the next five years. Some forecasters—they
probably don't come into what the Treasury sees—are talking
about a real terms decline in property prices of up to 30%, and
when I asked the Governor of the Bank of England this question
when he came not last time but the time before, he spoke about
a 20%, 25% or 30% potential readjustment of property prices. Those
are really big numbers, yet you are talking about 1.4% next year.
We are looking at tax revenues in the form of
stamp duty coming in, and at consumer confidence, but there are
massive variations. I am quite interested in how confident you
genuinely are in that 1.4% and the various other figures going
forward because—why don't you answer that, and then I'll
come back on what you say?
Robert Chote: We certainly would
not be confident about it. We are taking median forecasts—you
have a range, of which that is the central one. Some of the people
who have much larger falls in mind typically are those who take
a firm view of our returning to some stable, long-term ratio of,
for example, house prices to earnings.
Q68 Mark Garnier: Why are they
wrong?
Robert Chote: They are not necessarily
wrong, but some of the people who give those large numbers are
taking a view on where we will get back to, and over what time
period we will do that. That has not been very successful.
Professor Nickell: I can tell
you why they are wrong.
69 Mark Garnier: Delighted.
Professor Nickell: They are wrong
because when they think in terms of a constant ratio of house
prices to earnings, they completely ignore the facts about how
rapidly you build houses, the growth rate of your population—the
sorts of things which, inevitably, will impact on house prices
in the long run. If you build houses at a rate that is well below
the rate at which the population grows for a long time, you must
expect house prices to rise relative to earnings—they won't
revert. As that is what has happened over the past 10 years, they
won't revert to the long run.
Q70 Mark Garnier: That in itself
is a fairly convincing argument, but the fact of the matter is
that you now have first-time buyers who are 35 or 36, compared
with 25 years ago, when they were 22 or 23. You have a change
where people are moving to interest-only mortgages, whereas we
are now looking to bring that back again, and the FPC potentially
coming in and saying—we don't know this, but it may—that
we have a housing bubble which should be deflated by 30%. There
are all those variables.
Professor Nickell: Who is going
to deflate it?
Q71 Mark Garnier: The Financial
Policy Committee. The Bank of England.
Professor Nickell: Yes, but this
is new.
Q72 Mark Garnier: It is new, but
it is quite important.
Professor Nickell: The Financial
Policy Committee is new. That is all I am trying to say. As
for the prospects for house prices, the fundamentals are on the
bullish side. We do not build any houses—
Q73 Mark Garnier: Because people
are not buying them, because they can't afford them.
Professor Nickell: We haven't
built houses at the rate of growth of the population for the last
decade. Now are building an exceptionally low number of houses,
but the fundamental question is whether credit will remain as
tight as it is now. It is credit—or the lack of it—which
is undermining the housing market. It is the reason why first-time
buyer deposits are now at levels that have not been seen for the
past 40 years. If that goes into reverse, the housing market
will become more buoyant, but if it doesn't the housing market
will move sideways. It is very unlikely to fall huge further
distances. There is enough buoyancy and enough demand to stop
that happening. That is my opinion.
Q74 Mark Garnier: That is fair
enough for me. I am delighted that we finally have an opinion.
Robert Chote: Can I add another
point on the sensitivity of that? You mentioned NIESR. It would
end up with house prices about 6% to 7% lower than implied by
our forecast in 2015-16. The impact of that on revenues would
probably be about £1.25 billion. That gives you a sense
of the magnitudes. That is assuming that there is also no change
in turnover, which is just as important for things like stamp
duty as the level of prices so there could be another effect there.
That gives you the sense that, if we are 6% to 7% too optimistic—if
"optimistic" is the word you want to use in this definition—you
are talking about £1.25 billion.
Q75 Mark Garnier: That is clear.
And in terms of consumer confidence, if NIESR was righter than
you, as it were?
Robert Chote: What impact would
that have on consumer confidence?
Q76 Mark Garnier: Yes.
Robert Chote: We have not made
any attempts to predict consumer confidence in the future, but
we are talking basically about the direct revenue effects on capital
taxes. It obviously depends in part of what is driving the change
in house prices.
Q77 Mr Love: After the excitement
of recent questions, I am going to resist the encouragement from
Mr Cryer and ask you about public sector job losses. I was struck
by the very different results of your modelling approach, which
you accept does not reflect departmental pay bills, plans or policies,
and that which is occurring from surveys done of public sector
organisations. I wonder whether that was a concern to you and
if you had attempted to take into account some of the emerging
evidence—admittedly not comprehensive—from the public
sector.
Robert Chote: No, at this stage
the sensible thing seems to take a view of the total amount of
money that is available to be spent on general Government employees
and to take as broad and simple a view of that as we can. It
means essentially taking a non-capital departmental expenditure
limit, local authority self-financed expenditure and the revenue
of the BBC, which counts for mysterious reasons as part of the
general Government, to say what pool of money would be available
there, to look at the forecasts that were made at the time of
June, and then to say, "Well, the Government have chosen
to reduce the squeeze on that pool of money by having welfare
cuts instead, so what difference does that make to the overall
picture?"
Essentially, there will be about 2.5% more money
to spend in those three categories taken together than there would
have been at the time of the June forecast because of the decisions
taken in the spending review. Therefore, you might expect general
Government employment to be about 2.5% higher in 2015-16 than
previously thought. That explains most of the reduction in the
expected level of public sector job losses since the June forecast.
We've also simplified and broadened the basis of the comparison,
which is a relatively small methodological change.
Q78 Mr Love: I accept all that.
You laid it out very comprehensively in your report, and it's
been widely accepted. It's just that there's an issue about some
of the emerging evidence. The Local Government Association appears
to be front-loading the reductions in staff and it is talking
about 140,000 jobs this year. An Ipsos MORI poll and a labour
market outlook suggest, once again, that even this year there
are likely to be significant job losses in the public sector.
When will that begin to impinge, if I can put it this way—this
is not a criticism—on the more mechanical way you're dealing
with these things? After all, this is a four-year programme, and
nobody really knows how Departments will respond to it. You have
to take emerging evidence into account.
Robert Chote: Absolutely. By the
time of the Budget, we should already be getting much more disaggregated,
Department-by-Department information. You will get that sort of
information earlier in some parts of the public sector than in
other parts of the public sector. Before very long, this sort
of forecasting approach will become less relevant than the fact
that there will be plans out there for general Government employment
for increasingly large parts of the public sector. You're absolutely
right that before too long we will start to get a more disaggregated
picture, depending on what particular Departments—bits of
Government—intend to spend their money on, rather than the
approach that we have to take now, which is the best approach
for the moment, of saying, "Let's look at the pool of money
and make an assumption about the pay bill." That leaves you
with a head count.
Q79 Mr Love: Would it be your
intention in your next report at the Budget to have surveyed each
Department for at least their initial view of what their work
load capacity will be?
Robert Chote: We're certainly
intending to look at what information the Departments are able
to provide at that stage. They'll need not only to provide it
to us, but to publish it anyway. With the Budget, in particular,
we may be in an awkward position where we have some good disaggregated
information in some areas, but not in others, and the question
is how you marry up the two.
Q80 Mr Love: Can I turn to the
private sector, where you're forecasting significant job creation?
We asked the Governor of the Bank of England particularly about
this. He's probably a little more sanguine than you are, and I
think that is because there is substantial emerging evidence of
labour hoarding and the possibility that, when growth starts to
increase, firms, rather than taking on employees, will try to
regain productivity and reduce their unit labour costs. Is that
an issue for you? Is that a concern? How would that affect the
projections you've made?
Robert Chote: It's clearly a possibility.
We've looked not just at employment but at the news that we've
had on total hours worked, for example. One issue that has been
raised about the good news on employment that we've seen since
the June forecast relates to the high proportion that is down
to part-time workers. You've also seen existing part-time workers
working more hours, which could be consistent with some of that
labour hoarding story as well. There is a clearly a possibility
that you end up with less employment creation and with that sort
of hoarding unwinding. But our view, given the relationships in
the past, is that this looks a reasonable employment forecast
over this period. We see a weak spot in the near term, because
we see growth dipping below trend again, so we think that the
remarkable good news that we've seen on employment in terms of
the comparison with the June forecast won't be sustained, and
you will get a bit of slippage back. Then, you do get an improvement,
the economy recovers and employment recovers with it.
Q81 Mr Love: Quite a lot of surveys
forecast that significant private sector unemployment would be
related to the fiscal retrenchment. Did you take that into account?
There has been some suggestion that was perhaps not part of your
forecast. Did you take into account any reduction in private sector
employment as a result of the linkage between the private sector
and the public sector?
Robert Chote: There may be less
direct demand of that sort for some areas, but that is not to
say that in the private sector as a whole labour cannot be reallocated
and used to meet private sector demand rather than public sector
demand. It is not a sector—a group of people—that
can be employed only in providing services to the public sector.
We take a broader view of the likely level of demand in the economy
and of employment, and one would hope that those people could
be redeployed in other areas.
Q82 Chair: The issue of the exchange
rates interested quite a number of my colleagues. You've produced
a couple of scenarios in the report: the delayed rebalancing and
the persistent weak demand, and also quite a bit of sensitivity
analysis. But there is very little on the exchange rate. In retrospect,
don't you think that's a bit of a lacuna?
Robert Chote: I don't think so.
At the time when we were putting together the report, that was
a reasonable thing to do. Obviously, we had the Irish situation
evolving as we were going through the forecasting process, so
there was an issue as to what impacts of that we should be taking
into account as we got to the end. The approach of taking UIP
as a way of doing the exchange rate forecast and having that as
a central basis is a reasonable one.
Q83 Chair: That isn't what I was
asking you. That's not at all what I was asking you. Everyone
agrees that you've got to pick something to work off as your central
forecast; not one of us has challenged that. What we've been asking
you in various ways for half the afternoon is what effect a sharp
exchange rate shock might have, particularly since some say there
might be one in the offing.
Robert Chote: If that looks like
a more sensible scenario to be looking at for the next forecast,
it is something we can certainly look at.
Q84 Chair: The independence of
the OBR depends not only on your being able to be independent
of the Treasury, but on your being seen to be. I just think it's
important that, particularly at this early stage, we explore a
little your relationship with the Treasury. How many meetings
did you have with the Chancellor?
Robert Chote: I've had two meetings
with the Chancellor. As you'll have seen, we've published a list
of substantive meetings with the Chancellor and his advisers.
Q85 Chair: Are you confident that his
officials and the people that you're working with to construct
the forecast are entirely independent of any influence that might
have come to them from their political masters?
Robert Chote: Yes. I've been extremely
impressed with the quality of our staff and the attitude that
they take in that relationship. At the end of the day, for good
or ill, it is we three who have to make the judgments, and we
take responsibility for the forecast. There has not been any attempt—either
directly by the Chancellor or his advisers or by what I would
interpret as indirect pressure—to change or influence any
of the judgments that we've reached.
Q86 Chair: And no inappropriate
pressure at all?
Robert Chote: No inappropriate
pressure, no.
Q87 Chair: Are you going to be
asked to produce a report on the performance of the key staff
who have worked to you on this?
Robert Chote: We will have, yes,
a standard process of career evaluation and personnel evaluation.
We are now in the process of moving to being a stand-alone organisation,
so we have to decide to what extent we adopt the Treasury's HR
policies and the progress of particular reviews of individual
performance, and we need to see whether we're going to do that
in much the same way, or do it differently looking forward. But
yes, there's obviously a question of looking at how everyone is
doing.
Q88 Chair: If you sense at any
time that you might come to the conclusion that you want to answer
differently any of those questions on independence, we should
put down a marker now that we will want you to come to us early
about it.
Robert Chote: I made it clear,
I think, in the confirmation hearing and beforehand, that if I
had any concerns on the financial position or on any other areas
of independence, this Committee would be hearing about it very
promptly.
Q89 Chair: This is a compliment,
but some might say a slightly backhanded one. You've produced
for us today a performance that in many respects would be indistinguishable
from that of a chief economic adviser in the Treasury tasked with
coming here immediately before the appearance of a Chancellor.
In fact, we have not one chief economic adviser but three people
charged with the task of thinking independently about this and
then coming to a view. Did you disagree about anything at all
when you were formulating the forecast?
Robert Chote: We had lots of discussions
as we were going along. I don't think that there were any particular
issues over which we disagreed.
Q90 Chair:
Spontaneous consensus.
Robert Chote: No, when you consider
how long the process goes on for and how many iterations there
are of the issues, it is hardly surprising that such things get
worked out over time. There are issues about the key economic
judgments and about the particular areas of revenue and spending
forecast that require judgments all the time. Obviously, we have
an interesting debate about what precise assumption we should
be using here or there, but no stand-up rows.
Q91 Chair:
We are grateful to you for appearing before us today. It has been
an interesting exchange—perhaps not quite what all of us
expected.
Robert Chote: If you get the collapse
of the euro that you hope for, we can come back and it will be
an exciting one to follow up on.
Mr Love: I told you so.
Chair: We have learned something about
the way it appears that the OBR will be operating. Thank you very
much.
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