IFS chief calls for transparency on energy price-cap analysis

Truss and Kwarteng urged to publish assessments supporting “biggest single fiscal event” in decades
Paul Johnson

By Jim Dunton

14 Sep 2022

Institute for Fiscal Studies director Paul Johnson has called on prime minister Liz Truss and chancellor Kwasi Kwarteng to publish the economic analysis informing their decision to cap energy bills at an average £2,500 per household for the next two years.

Johnson, who is 55, said the decision – expected by some to cost up to £150bn – could be the “biggest single fiscal event” of his lifetime, and that it was “remarkable” that Truss’s statement on Thursday last week and the supporting documents gave no official estimate of the cost.

“The fact that the cost is most uncertain, depending as it will on the path of future energy costs, is all the more reason to publish underlying analysis, including estimates under different scenarios for how energy prices might evolve,” he wrote in The Times.

“One also would expect some official analysis of the effects on household incomes. We may have been without a functioning prime minister over the summer, but there can be no doubt that this analysis was carried out by the civil service. It exists. It should have been published.”

Johnson said uncertainty about the cost of the measures outlined by Truss was “not solely about the cost over the next year or two”, either. He said it extended to how long the subsidy would be in place.

Johnson said the public needed to remember that Truss’s energy package effectively meant that for every £1 consumers spent on energy, the government was spending 75p.

“A timetable, an exit strategy, at least a plan to come up with a plan, should have been announced,” he said.

“If such a big, imperfect, expensive, untargeted policy is understandable in the face of the present urgent situation, it is not understandable as the default for 2023-24. A year of hard work may not reveal anything better, but that year of hard work to look for something better should be starting right now.

“It is not only the cost and distributional impact of this colossal policy about which we have heard nothing; we also have not seen any official forecasts of the economic and fiscal environment into which this huge grenade has been lobbed.

“The forecasts published by the Office for Budget Responsibility back in March are now hopelessly out of date. We know that it has new ones, which it is ready to publish, because it has told us so.”

Johnson acknowledged that former PM Boris Johnson and then-chancellor Rishi Sunak had introduced the coronavirus support packages in early 2020 without supporting analysis of their impact.

But he said the “whole point” of having an independent OBR was to provide trustworthy information on both the costs and impacts of policy, and trustworthy fiscal and economic forecasts.

“We don’t need a full 300-page document every time the government does something, but transparency surely demands that, at a minimum, we know what government thinks the policy is likely to cost and what its key impacts will be,” he said.

Johnson said transparency and openness were “crucial aspects” of maintaining trust in the capacity, honesty and focus of government, and were also “relatively costless”.

He also questioned the logic of the new chancellor’s decision to eject Sir Tom Scholar from the Treasury's top job last week.

“Not sacking the longstanding permanent secretary to the Treasury in your first day in office, as Kwarteng did, might have been a good start,” he said.

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