A significant and concerning rift has opened up between the UK's independent fiscal watchdog and the government's own Treasury department. Ministers stand accused of embracing a damaging 'theatre of errors' that undermines the credibility of economic forecasts and the rules designed to safeguard the nation's finances.
The Clash Over Fiscal Forecasts and Rules
The core of the dispute centres on the role and findings of the Office for Budget Responsibility (OBR). Established to provide independent scrutiny, the OBR's latest forecasts delivered a sobering message: the government's existing fiscal plans are insufficient to meet its own legally binding borrowing rules in the coming years. This assessment creates a major political headache for the Treasury.
Instead of engaging substantively with this warning, the Treasury has opted for a strategy of theatrical dismissal. Senior ministers have publicly sought to discredit the OBR's analysis, attempting to cast doubt on its models and assumptions. This approach is not a technical debate but a political manoeuvre, designed to create space for pre-election tax and spending promises without appearing to break fiscal commitments.
Undermining the Guardian of Fiscal Credibility
The OBR was created in 2010 precisely to end the previous era of overly optimistic Treasury forecasts and restore trust in the management of the public finances. Its independence is its greatest strength and a cornerstone of UK economic credibility with international markets. The current ministerial campaign to publicly challenge its authority risks severely damaging this hard-won reputation.
This conflict moves beyond mere disagreement. It represents a fundamental challenge to the architecture of fiscal responsibility. The government's own rules, which mandate that underlying debt must be falling as a percentage of GDP within a five-year forecast period, are now in the spotlight. The OBR states the numbers do not add up; the Treasury insists its future, unspecified plans will bridge the gap. This creates a dangerous vacuum of uncertainty.
Consequences for Economic Stability and Trust
The repercussions of this 'theatre of errors' are profound. Firstly, it threatens to erode investor confidence. If the independent watchdog's assessments are routinely undermined for political convenience, the perceived risk of lending to the UK government could increase, potentially pushing up borrowing costs for the nation.
Secondly, it degrades public debate. An informed democracy requires clear, trusted data on the state of the nation's finances. By muddying the waters and politicising the OBR's forecasts, the government makes it harder for voters to distinguish between credible policy and fiscal fantasy. The short-term political gain of promising tax cuts or spending rises is pursued at the expense of long-term economic stability and transparent governance.
Ultimately, the Treasury's stance is a gamble. It bets that the political capital gained from disputing the OBR outweighs the economic capital lost by unsettling the institutions that underpin fiscal discipline. History suggests that when governments choose to shoot the messenger on borrowing, it is usually the public finances that end up wounded.
