New, lower growth forecasts published alongside the Budget were based on assumptions about how the swathe of government spending cuts may affect UK economic output and could be revised again in the Autumn, said Sir Alan Budd head of the Office of Budget Responsibility (OBR).
Asked if there was still scope to cut growth forecasts, Budd (pictured) said: ‘Yes. Or raise them.
'We just don’t have enough information to know one way or the other.’
Budd was speaking to Citywire on the sidelines of an Institute for Fiscal Studies conference on the impact of the Budget.
Budd’s new department has been criticised as its latest forecasts on growth and inflation are seen by many as too optimistic.
Some say the OBR’s forecasts are based too closely on the Bank of England and therefore are not independent. Given the department had only weeks to prepare new forecasts, many are skeptical about their credibility.
The OBR now sees growth at 1.2% this year and 2.3% in 2011 – having taken some account of the massive spending cuts and new taxes announced in yesterday’s Budget.
That is lower than the 1.3% and 2.6% growth it had forecast just last week.
At the conference, Budd had said it was unfair to say he had made a judgement on how the new taxes and spending cuts could affect the UK economy.
He said his growth forecasts were based on an assumption.
‘We cannot make a judgment until we know what the spending cuts will be,’ he said.
The Spending Review, due to conclude in the autumn, will set spending limits for every government department for the period 2011/12 to 2014/15.
IFS director Robert Chote said that the governemtn's decision to cut the government debt through a 74:26 ratio of spending cuts to tax increases the government will have to ake sieme very tough decisions.
'We are looking at the longest, deepest sustained period of cuts to public services spending at least since World War II,' he said.
Researchers at the IFS said it was clear that while the very rich would be hurt by the austerity measures announced by chancellor George Osborne yesterday, the very poor would also be hit hard.
Researcher Mike Brewer also said it is unclear how the planned reforms to welfare spending would help get people off benefits.
'The impact on work incentives is mixed,' he said.