Clarke fudges growth forecast

CHANCELLOR Kenneth Clarke suppressed his own advisers' forecast for economic growth in order to make room for pre-election tax cuts, according to Treasury insiders.

The government's economic forecasters calculated that growth in 1996 would be 2.5 per cent, but the Chancellor overruled them and published a growth prediction of 3 per cent.

The significance of this ministerial "cooking the books" lies in the political opportunities that a higher growth rate would allow Mr Clarke. Shadow Treasury advisers fear he will continue to massage the figures in the summer economic forecast and his November budget to give the impression that the economy is strong enough to permit a cut to the basic rate of income tax by up to 2p in the pound.

The officials Mr Clarke overruled were from the Treasury's macro-economic policy and prospects division, under Alan Budd, a former professor of economics at the London Business School. Three well-placed Treasury insiders have confirmed the Chancellor's move.

Most independent forecasters had predicted that growth this year would be no more than 2.4 per cent, and they have subsequently revised that figure down to 2.3 per cent.

A Shadow Treasury adviser said: "Mr Clarke is not the first Tory Chancellor to cook the books. In his Budget before the 1992 election, Chancellor Norman Lamont not only requested a higher growth figure but required the Treasury forecasters to cut their forecasts for the public sector borrowing requirement by pounds 5 billion for the following year and pounds 10 billion in each subsequent year.

"The risk is that Chancellor Clarke is being tempted to adopt a similar strategy this year in order to depress the public sector borrowing requirement for 1996/97 and 1997/98 and justify pre-election tax cuts."

Labour argues that even the suspicion that growth and PSBR forecasts are being politically manipulated is both wrong and damaging to the credibility of economic policy-making.

Shadow Chancellor Gordon Brown yesterday challenged Mr Clarke to adopt his proposal for a "Green Budget", published in the summer with an initial economic forecast and a clear statement of the government's fiscal rules.

Labour is planning to replace the Chancellor's "six wise men" - the Panel of Independent Economic Forecasters - with a full-time Council of Economic Advisers in the Treasury.

This body, it was disclosed yesterday, will be asked to audit the government's economic forecasts prior to the Budget "to confirm that they are being published in good faith without political manipulation."