This unholy alliance between the bond markets and the forecasters will ruin us

Economic forecasters and the bond markets are locked in a dysfunctional embrace that increasingly rules our lives.

- Will Hutton

Three million British families will be poorer next year as a result of Rachel Reeves’s £5bn of welfare cuts.

The chancellor didn’t dare risk incurring the wrath of the all-powerful bond markets in her spring statement, after the Office for Budget Responsibility forecast that without such savings she would run out of financial road in five years. She had choices about how to find the money but no choice as to whether it had to be found. No government's reputation survives assault by the financial markets.

Does it make any sense to be in thrall to a forecast that will almost certainly be wrong? Yet the idea of forecasts as near-divine prophecy was underlined by the array of depressing predictions that greeted the world’s finance ministers at the International Monetary Fund's spring meeting last week.

It is a prison of expectations from which nobody seems capable of breaking free. Yet, since no model is failsafe and uncertainty abounds, economic forecasters recognise that whatever they predict will be trumped by events. The best acknowledge that their forecast is only one of a range of possibilities, a likely direction of travel rather than holy writ.

But caveats are ignored. We crave certainty even while we know we are beset by unknowns. John Maynard Keynes constructed his theory of capitalism - that it is a wild if creative beast that constantly needs taming - because economic actors, whether they are companies, unions, banks or investors, don’t even know what they don’t know.