Head of Office for Budget Responsibility will not stay beyond initial three-month term following controversy over forecasts for job losses

This article is more than 10 years old

This article is more than 10 years old

Sir Alan Budd has quit the government's new spending watchdog after only three months to return to the private sector.

The Treasury said Budd will step down as head of the Office for Budget Responsibility when his three-month contract expires at the end of this month.

Budd, who is a former Treasury economist and ex-Bank of England policymaker, was appointed interim head of the OBR on its creation in May, but many had expected him to stay in the role until the government spending review on 22 October.

The surprise decision is expected to fuel speculation that Budd had become disenchanted with the role, which proved more controversial than expected.

Last week Budd, 72, provoked a storm of protest after he intervened in the debate over job prospects for the economy. Hours before prime minister David Cameron was due to defend the government against attacks that it would sacrifice 1.3m jobs as part of its austerity plan, he released figures to show cuts would amount to fewer than 1m jobs and that 2m private sector jobs would be created.

The Labour opposition was forced on to the back foot during the debate after Cameron quoted the OBR figures.

Senior MPs on the Treasury select committee said the incident provoked concerns that Budd was too closely allied to the government and had sacrificed the OBR's independence. He was expected to come under close questioning by the committee at its first meeting.

The Treasury said Budd's contract ran for three months. "It was always Sir Alan's intention to leave in the summer," a Treasury spokesman said.

"He was appointed to provide forecasts for the June budget and advice on the creation of the permanent OBR."

The creation of the independent fiscal watchdog was one of the first acts of Britain's coalition government to scrutinise policy and publish growth and state borrowing forecasts.

The Treasury declined to comment on who would replace Sir Alan at the OBR.

"The Treasury will seek to ensure continuity in recruiting his successor," the spokesman said.

When he was appointed, Budd said that his role as chairman of the OBR was "the most exciting challenge of my professional life". He worked alongside former Royal Bank of Scotland chief economist Geoffrey Dicks and Graham Parker, a former career civil servant. The OBR was supported by a Treasury secretariat of economics.

Budd studied economics at the London School of Economics and Cambridge, and held academic roles in Britain and the US before becoming senior economic adviser to the Treasury between 1970 and 1974.

In the 1980s he was professor of economics at the London Business School, before becoming chief economic adviser to the Treasury between 1991 and 1997. Budd was at chancellor Norman Lamont's side when the UK was bundled out of the European Exchange Rate Mechanism.

When Gordon Brown moved into No 11 in 1997 Budd became a founder member of the Bank of England's monetary policy committee, later heading the inquiry into the gambling industry which led to the liberalisation of gaming laws.