According to the Institute for Fiscal Studies, the worsening economic outlook has left the Chancellor less headroom to hit his forecasts. "Going forward, he is going to be uncomfortably dependent on the judgments that the OBR makes over the potential output of the economy," Paul Johnson, the IFS director, said.
Robert Chote, head of the OBR, offered the Government some support for its "Plan for Growth" despite leaving the trend growth rate of the economy unchanged in the official forecasts, which has been interpreted as a criticism of the Government's plans.
He said on Thursday: "There will be some elements from the micro measures [that will help]. Planning, it is reasonable to say, does have the potential to improve the productive capacity of the economy. But it will depend how it plays out.
"We need a strong evidence base to be confident that another number is more likely to be right. It doesn't mean these policies aren't worthwhile just because you can't put a figure to them."
He also stressed that the OBR's independence had passed its first real test. "We came under no pressure to include a positive growth effect in the longer term."
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