The Office of Budget Responsibility faces a big credibility test today. Chris Giles, the FT’s economics editor, has an agenda-setting story that raises doubts over its very purpose and independence. It is far more significant than any speculation over Sir Alan Budd’s departure.

Through persistent questioning, Chris uncovered that the OBR tweaked its Budget forecasts at the last-minute to erase around 175,000 public sector job losses by 2014/15. Read more

Now this is odd. Since George Osborne and his axemen entered the Treasury, far from cutting the school building programme, they’ve actually allowed it to swell.

Around £1.5bn of additional contracts have been signed since May, a billion of which came in the last 21 days. Given departments are facing average cuts of 25 per cent, you have to wonder what on earth is going on. Read more

Our economics team ran some tests to show the regional impact of cuts and illustrate the challenge of eliminating the deficit without punishing the poor.

If you cut social security payments by 10 per cent, for instance, they found the poorest areas were hit hardest. Household disposable income fell by 3.6 per cent in Merseyside and only 2.1 per cent in Berkshire and Buckinghamshire. Read more

Jim Pickard

Robert Peston is not only a former colleague but also a superb financial journalist. But I can’t quite agree with the premise on his blog today – “a coalition housing crash” – that changing stamp duty could prompt a damaging property downturn. (To be fair his argument is more nuanced than the heading suggests).

I’ve been pondering for some time how the government could restrain any newfound housing bubble if the current trends (prices rose 10.5 per cent in the year to April, according to Nationwide*) continue. Prices are still lower than their peak but shooting up in many parts of the country (admittedly not all) as a direct result of the Bank of England base rate being at the artificially low rate of 0.5 per cent. Mortgage rates are therefore lower than they might otherwise be, a situation that could in the coming few years have a dangerous impact on the market. Letting this trend continue – until it is once again unsustainable – is the real risk for the coalition. Read more

Jim Pickard

You don’t have to be entirely cynical to wonder whether David Davis’s intervention over capital gains tax is a calculated political move designed to plant his flag firmly in the “Tory troublemaker” camp.

The coalition is planning to lift CGT from 18 per cent (over a threshold of £10,100 a year) to a level closer to that of income tax – which is paid at 40 per cent by high-earning middle classes.

The phrasing was originally that CGT would be “similar or close to” income tax levels. Now it’s “closer to” income tax levels, a subtle shift which could allow for a less radical move.

Despite this, however, Tory backbenchers are up in arms; on behalf of their constituents and not only themselves. John Redwood is also at the forefront of the rebellion, having written to the Treasury yesterday to ratchet up the lobbying for a taper to restrict the most punitive tax rate to assets that are not held long-term. Read more

Jim Pickard

I still can’t get my head around the sight of Lib Dems wandering around the Treasury as if they run the place; which – of course – they now do. Vince Cable, sat in front of scores of journalists and senior civil servants, also seemed slightly bewildered at finding himself on podium with David Cameron, Theresa May and George Osborne.

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If coming third in the polls and a seemingly collapsing campaign strategy wasn’t causing enough stress within the Labour party, a Labour parliamentary candidate from North west Norfolk has called Gordon Brown “the worst prime minister we have had in this country”.

According to the Lynn News newspaper, Manish Sood, who is contesting a Tory-held seat, said: “I believe Gordon Brown has been the worst prime minister we have had in this country … It is a disgrace and he owes an apology to the people and the Queen.” Read more

Jim Pickard

Alex 10.50 Final post. An intriguing tweet from Evan Davis. Did any of the candidates actually win this debate? Or was it a dead heat? The polls indicate that Cameron prevailed. But the numbers are suspiciously close to broad voting intentions. Could it be that the public reverted to the person they were intending to vote for at the begining of the debate? I suspect few people would have had their opinion changed by the last 90 minutes. It will be interesting to see whether the post-debate spin has more of an effect.

Alex 10.47 Some final thought from Alan Schroeder, our US debate guru.

Debates do not always produce clear verdicts, and in my opinion this one qualifies as a three-way stand-off. Judging purely on optics and not on substance, I would call this Brown’s best debate of the three. I thought he handled the Mrs. Duffy gaffe with deftness, and I liked his lawyerly closing argument. Even Brown’s goofy smile at the very end came across as endearing rather than menacing.

Cameron has never quite come into focus for me in these debates. He’s obviously an intelligent, thoughtful, and well-spoken man, but from my perspective he doesn’t leave much of a footprint. That criticism notwithstanding, I would also call tonight Cameron’s best debate, and I wouldn’t be surprised to see him do well in the snap polls.

Clegg has consistently been the most interesting performer of the three, but tonight he seemed to be drawing from the same familiar well instead of broadening his message. One wonders if Clegg’s surprise win in the first debate may have caused him to peak too soon. A strong finish in round three might have given Clegg, in the immortal words of Spinal Tap’s Nigel Tufnel, “that little extra push over the cliff.” Instead, he allowed both Cameron and Brown to make gains on him.

Jim 10.46 Clegg should also brace himself for a row tomorrow over his claim that 80 per cent of immigrants into Britain came from the EU. Apparently the real figure could be much lower; closer to a third.

Jim 10.43 Also, how come no one mentioned Gordon Brown’s Achilles Heel – ie his claim to have extinguished “boom and bust” permanently? And how come the other two didn’t nail Clegg over the LIb Dem policy of joining the euro? And did Cameron have a lucky escape in not getting grilled over his opposition to rescuing Northern Rock?

Alex 10.32 One thing to note. Was Vince Cable ever mentioned? What happened to the great Lib Dem economic titan? Had the economy been the topic of the first debate, we’d have heard Clegg repeating his name ad naseum. Shows how much his confidence has grown as leader. He don’t need little old Vince any more.  Read more

Try it if you dare. The FT deficit buster — an online simulator of the next three year spending round — allows you to choose your own package of cuts. It should definitely carry a health warning.

The project started as a simple question: can we show what it would take to halve the deficit by making £30-40bn cuts? The answer exposes just how little all three main parties are willing to tell you about the looming spending squeeze.

Take the easiest option in the game: acting as your own chancellor, free of party spending commitments. In today’s splash, we include an illustrative package of measures to make savings in the order of £40bn:

A 5 per cent cut in public sector pay; freezing benefits for a year; means-testing child benefit; abolishing winter fuel payments and free television licences; reducing prison numbers by a quarter; axing the two planned aircraft carriers; withdrawing free bus passes for pensioners; delaying Crossrail for three years; halving roads maintenance; stopping school building; halving the spend on teaching assistants and NHS dentistry; and cutting funding to Scotland and Wales by 10 per cent.

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Jim Pickard

JP 11.27pm Time for my last attempt at sober analysis of the debate and the aftermath.

What matters ultimately is who came out on top between Cameron and Brown. After all, the Lib Dems have no chance in the majority of seats in the general election. They may still be glad to increase their number of seats from the current 63. Those are the basic facts.

If the preliminary reports are correct – that Cameron was significantly ahead of Brown – that may, ultimately, turn out to be crucial.

Regardless of Clegg’s moment in the sun (“Clegg the outsider seizes his moment in the TV spotlight” is the Guardian front page tomorrow. And “shock victory for Clegg” is the Daily Mail.) It’s still about blues versus reds. Read more

Jim Pickard

Curious to see David Miliband, former adviser to Tony Blair – and one of the key Blairites in cabinet – turning on Dubya. In a speech today, the foreign secretary compared David Cameron to George W. Bush in what can only be described as a negative way. Read more

Jim Pickard

What to make of Brown’s new mea culpa over bank regulation in the run-up to the crash?

The prime minister has told ITV (in a programme to be screened tonight at 7.30pm) that in the 1990s the banks begged to be free of regulation and Labour in effect accepted this.

It’s a striking confession. Until now Brown has usually sought to shift the blame on to failures of international – rather than national – regulation of financial markets. And of course he has insisted that the credit crunch was imported from the US.

Alistair Darling has also blamed the banks instead of the regulators as recently as last summer. Read more