George Osborne won immediate plaudits for the early establishment of the Office for Budget Responsibility to take the politics out of government economic forecasts. The hyperbole that surrounded the announcement was overdone, but the new OBR should increase trust in government forecasts and underpin UK sovereign debt markets if its performance in practice meets its promise. Monday marks its first test.

Sir Alan Budd, OBR chairman, needs to move from the easy task of reveling in the OBR’s establishment to the more difficult task of building long-term credibility for the new body and demonstrating it has not been captured by the Treasury in its short life.

Note that Monday’s announcement is a new economic and public finance forecast, based on unchanged policies. It will not include the OBR’s assessment of whether the government’s tax and spending plans give ministers a 50:50 chance of meeting their own ambitions for the public finances.

If the Office meets or exceeds the following basic requirements on Monday, it will have got off to a good start.

• Clarity on forecast changes
  The OBR must make it absolutely clear why forecasts for the economy and growth are different from those in the March 2010 Budget. This means deconstructing forecast differences into changes in assumptions and new information received. Any merging of the two would be a disaster for transparency. The forecasting changes for growth must flow clearly into forecasting changes in tax revenues and public spending on items linked to the health of the economy such as social security.
• Publish its assumptions on the link between growth and the public finances
  The Treasury has been keen to speak privately over the past year or two about how it decoupled its growth forecasts from its public finance forecasts. Sensible though this was as ammunition for the Treasury in the fight between Gordon Brown and Alistair Darling, it was no way to run a government or a forecast.

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