Does the OBR have too much power?

Independent forecaster was a 'once-gentle advisory organisation'. Has it now become the Treasury's 'puppet-master'?

Rachel Reeves, Chancellor of the Exchequer
OBR rules 'forced' Rachel Reeves to make 'hasty decisions', say critics
(Image credit: Wiktor Szymanowicz / Future Publishing via Getty Images)

Rachel Reeves' Spring Statement has once again thrown into question the role of the Office for Budget Responsibility (OBR), with claims that the quango holds too much sway over the UK's fiscal policy.

The "increasingly influential role of the OBR" was the "most remarkable" thing about the statement, said Michael Simmons in The Spectator. Reeves was forced to take "hasty decisions to restore a thin £9.9 billion 'headroom' needed for emergencies", said Alex Brummer in the Daily Mail. These include the "controversial" move to "slash Personal Independence Payments to disabled people". The OBR, a "once-gentle advisory organisation", has become the "puppet master".

What did the commentators say?

Part of the problem is that the media increasingly treat the OBR's forecasts "as if they are certain", said Dr Gerard Lyons at CapX. But "the margin of error on one-year-ahead growth is 0.5%". It is a concern then, "that the growing political need for an endorsement from the OBR may now be influencing policy".

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One backbench Labour MP told PoliticsHome that the government "needs to do something about the OBR's remit and forecasting". It is "forcing elected politicians to follow its lead", in fear of "spooking the bond markets".

"The Truss budget showed the cost of ignoring" the OBR, said Theo Bertram, director of the Social Market Foundation thinktank. But the current "extremely strict adherence to rules" based on "micro-haggling" between the Treasury and the OBR over "unreliable forecasts" is "consequential and questionable".

The OBR is not too powerful, said Henry Hill at Conservative Home. It "has no more 'power' than do your bathroom scales". Neither of these can "issue commands" but "consulting either on a regular basis has a strong tendency to influence your behaviour".

The problems the OBR causes politicians is "very often because they lie to it and themselves", said Hill. "It is legally obliged to take the government at its word; if you continually tell it you will raise Fuel Duty the day after tomorrow, you will continually need to make fresh cuts" if you then don't.

What next?

But "what’s the alternative?" asks Adam Smith in The Telegraph. "Taking the impact of growth policies back in house to the Treasury" would see chancellors deciding "what boosts growth", rather than "have to prove what might to an independent body".

The OBR holds chancellors to account for their fiscal rules "to reassure the financial markets that the government's finances are sustainable", said The Independent's John Rentoul. It certainly "could be argued" that having "transparent rules" and "independently set benchmarks" is "more democratic than the alternative, which would be to have a politician say, 'I'm sure this will work, trust me'".

Jamie Timson is the UK news editor, curating The Week UK's daily morning newsletter and setting the agenda for the day's news output. He was first a member of the team from 2015 to 2019, progressing from intern to senior staff writer, and then rejoined in September 2022. As a founding panellist on “The Week Unwrapped” podcast, he has discussed politics, foreign affairs and conspiracy theories, sometimes separately, sometimes all at once. In between working at The Week, Jamie was a senior press officer at the Department for Transport, with a penchant for crisis communications, working on Brexit, the response to Covid-19 and HS2, among others.