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The oracle speaks

Robert Chote’s Institute of Fiscal Studies is widely seen as the source of all wisdom on economic matters. So what did its director make of the Budget? Fraser Nelson asks him

23 June 2010

12:00 AM

23 June 2010

12:00 AM

Robert Chote’s Institute of Fiscal Studies is widely seen as the source of all wisdom on economic matters. So what did its director make of the Budget? Fraser Nelson asks him

A British Budget is never over until Robert Chote has spoken. It’s unclear just when this was inserted into Britain’s unwritten constitution, but his status was obvious from the audience gathered to hear his verdict on Wednesday. Policymakers, economics editors, broadcasters — all had come to note down, and take as gospel, what this friendly, slightly gangly 42-year-old had to say. ‘It’s amazing how one man came to wield so much power,’ muses a Treasury source. Just what to do about it has been on the Tories’ minds for some time.

Over the eight years that Chote has been running the Institute of Fiscal Studies, it has come to occupy its own place in public life. The IFS, rather than any committee of MPs, is seen as the Britain’s leading economics watchdog. Last year, when George Osborne was unexpectedly given Alistair Darling’s post-Budget slot on BBC radio and was asked if there were any hidden nasties in the Chancellor’s statement, he said he did not know, but that he would when the IFS had spoken. Even the man who is now Chancellor regards Chote as some kind of economics oracle.

I met Chote last week, preparing for his big post-Budget pronouncement. He looked even more low-key than normal, in a black T-shirt, jeans and trainers. In the corner sat the dusty computer whose output politicians have so come to fear. When Chote started giving his post-Budget briefings, he says, they were held in the basement. Last year, they had to move to a theatre to satisfy demand; this year, to an auditorium with a 450-seat capacity. ‘It is strange, and slightly daunting,’ he says. But he knows the drill. ‘You have day one, in which the government tells you what they want you to hear. And day two, when we try to tell everyone what the government doesn’t want you to hear.’

There was a time when the media performed this role. But newspapers have for years been haemorrhaging sales and staff — and, with them, the expertise required to root out economic spin (as Gordon Brown found to his delight). Over the years it is Chote’s team, rather than any newspaper, which has routinely found the big Budget story. Last year, it was the hidden spending cuts. Before that, the fact that the 50p tax would mean less tax revenue, not more. Before that, how Brown’s 10p tax would hit millions of the worst-off. Chote’s hit rate became so lethal that politicians would nervously pass him their draft policies to see, unofficially, if he approved. ‘We do give advice,’ he says. ‘We’ve done it with the Liberal Democrats. And when Labour was in government we even did it with sections of government that didn’t feel that was a question they would like to ask the Treasury.’ It is, he says, technical help; simply applying the IFS expertise to various policies. But those who seek his advice know it runs deeper. If he thinks numbers don’t add up, and says so in public, the media will trash the policy. His decisions are seen as final.

If politics is a battle of ideas, whose side is Chote on? He broadly approved of the Budget but — annoyingly for Osborne — pointed out that the VAT rise was not ‘unavoidable’ and required to pay for child tax credit. And even the increased tax credit is a £2 billion ruse by the Treasury to make sure the Budget passes the test of famous IFS charts which purport to measure child poverty. The Treasury has, yet again, spent billions seeking to manipulate these poverty spreadsheets.

It is a perfect example of the power of metrics. ‘The phrase “child poverty” refers to Gordon Brown’s flagship income redistribution programme. It is an ingenious piece of spin. An ever-moving poverty line is chosen (60 per cent of average income) and tax credits are used to lift people from just below this line to just above it. The person is then declared to be “lifted out of poverty”. To stop questions about whether people should be earning their way up, the statistical measure is called “child poverty” and counts the person’s children. The IFS keeps the score, and will say that billions are needed to meet the government’s target. Such is the IFS’s authority that not just the media, but most politicians, accept its judgment uncritically.

The Lib Dems also view child poverty as all-important — and only signed up to the cuts if they would not worsen the child poverty index. So £2 billion was spent in the Budget to ensure this index did not move. Chote says he simply keeps the score, and does not advocate any policy. ‘We just asked how much progress the government made against its own target, and how much they’d need to spend if they were to hit it,’ he said.

But would he conduct a study, for example, asking how far child poverty would fall if single mothers married the fathers of their children, thereby asking to what extent this policy is prompted by family breakdown. He looks slightly shocked at the idea. ‘Er, well, no. I mean, we’ve done work looking at things like — can you tell from the evidence whether marriage and cohabitation makes a difference to the outcomes for children?’ The conclusion was that they did not. Frank Field is working on a new index for child poverty — but until one is produced, the coalition is shackled to the old one.

Chote says it’s not his job to argue for a bigger or smaller state, but simply to apply the IFS’s considerable power to assessing government budgets. ‘We have never said what we believe to be an appropriate level of public spending. It’s not our job to say, should we be Sweden or the United States? Our job is partly to point out that you can’t be a Swedish spender and an American taxer.’ And Chote has inserted enough thorns into governmental flesh to prove he is no patsy. The IFS has produced research showing that the poverty among single, childless people — ignored as the government focused on ‘families’ — is at a 40-year high.

In fact, he has been irritating those in power since he was made economics editor of the Financial Times at the age of 26 (recruited, he says, ‘in a flamenco bar during the G7 summit in Madrid’). He denies the rumour that Mr Brown had him forced out of the newspaper. ‘He wasn’t the greatest fan of my work,’ he says. ‘But at the FT, you do jobs in three-year stints. I had been five years in mine, and had to ask myself if I wanted to go off and be something like Latin American correspondent.’ He did not. After a short spell at the IMF in Washington with his civil servant wife (she worked in Blair’s policy unit, and is now at the Department of Justice), he joined the IFS in 2002.

The IFS is normally a training ground, rather than a destination. He lists its alumni — starting with Rupert Harrison, now chief economic adviser to Mr Osborne. ‘Then we have Steve Webb, a minister under Iain Duncan Smith. On the media side we have Evan Davis [BBC Today programme presenter], Stephanie Flanders [BBC economics editor], Chris Giles [economics editor of the FT] — people like that. The IFS school, he says, gives its disciples the ability to put economics into practical effect. ‘It’s that combination of mouth and trousers.’

This week’s Budget was designed by Mr Osborne to steal as much of Chote’s thunder as possible. It is the most transparent in recent memory, so the IFS has less ammo to discharge. The Chancellor also set up the Office for Budget Responsibility under Sir Alan Budd, partly as a new watchdog to rival the IFS. After the Budget, the Chancellor said he confessed to the figure of 25 per cent cuts in unprotec
ted departments because Chote would have revealed the figure anyway: he would not ‘hide hard choices in the small print of the Budget’. This is Mr Chote’s contribution to British democracy: with his team on the case, it has become pointless to even try.

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