The Office for Budget Responsibility (OBR) is a UK institution that is genuinely world-beating according to the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF), who have called it the gold standard or model for independent fiscal institutions around the world. So it was a shame to see the chancellor’s “friends” briefing about his “visceral hatred” of the organisation. He should value its role, not be railing against it.
It is unclear whether this unfounded attack on an important UK institution was briefed with Rishi Sunak’s approval, but he should make public his support for the OBR or risk fuelling concern about this government’s apparent aversion to objective scrutiny.
According to the Times, Sunak’s principal complaint about the OBR is that dire warnings about living standards overshadowed his Spring Statement – with the briefing dismissing them as ”normative policy judgements” that ruined headlines. Also quoted in the piece is the OBR’s assessment that Sunak’s tax policies, when taken together, will lead to a rise not a fall in taxes.
This line of argument is absurd. Forecasts for the cost of living and assessments of the tax burden are not normative policy judgements. They are a standard part of the OBR’s responsibility – enshrined in legislation by George Osborne, Sunak’s Conservative predecessor as chancellor – to produce detailed five-year forecasts for the economy and public finances, incorporating the impact of tax and spending measures announced by the chancellor.
The fact that the UK is going to see the biggest fall in living standards since records began reflects the OBR’s best prediction, based on available data and its robust forecasting process, of how the economy and public finances will evolve given the support announced by the chancellor. It does not reflect a judgement on whether or not the policies are good or whether alternatives should have been pursued.
Many economists have expressed surprise that the chancellor did not do more to cushion the blow for low income households given the forecast for living standards. But the reaction of these commentators to the forecast – which is broadly in line with (and perhaps more optimistic than) the one produced by the Bank of England – has nothing to do with the OBR, which has not commented on the chancellor’s policy alternatives (as this would be straying beyond its remit).
The OBR was created in 2010 in order to – according to then chancellor George Osborne – “remove [from politicians] the temptation to fiddle the figures” by passing the responsibility for producing economic and fiscal forecasts from the Treasury to an independent organisation.
Since its creation the OBR has built an outstanding reputation and consistently demonstrated its value by producing some of the most accurate and comprehensive forecasts for the UK economy. This is true especially when its performance is compared with the pre-OBR forecasts that the Treasury produced (which were accused of including a degree of politically motivated wishful thinking).
The organisation is recognised internationally as an outstanding part of the UK’s institutional landscape and, according to the OECD, is “considered by many as a model independent fiscal institution”. It has been widely credited with bringing necessary transparency to the public finances and for enriching the wider debate on fiscal policy.
It is possible that the chancellor also blames the OBR for the uncomfortable way in which it has exposed the economic impact of Brexit. Appearing before the Treasury select committee he was forced to admit that Brexit is “a big part of the reason why this [fall in trade] is happening”. But here the OBR is simply with the mainstream of economists, and the OBR’s assessment is based on the government’s own internal analysis, published in 2018. Moreover, the small extent to which trade agreements with other countries act to offset the dampening effect of the new arrangements with the EU is a view shared by economists in the Department of International Trade in their impact assessments.
Whether or not this story was briefed to the Times with Sunak’s approval, this sort of anonymous briefing does the public a disservice by allowing politicians or their allies to get messages out without having to take responsibility for them.
Sunak should clarify his position on the record. Otherwise we can only speculate that he or his staff are unjustifiably calling into question the OBR’s credibility simply because its forecasts for the economy and public finances – which it is literally obliged to produce under legislation – are unhelpful for the government’s narrative.
The OBR is one of the best legacies of the Cameron/Osborne government; the chancellor should pledge to protect it.