Former Budget Watchdog Head Calls for Stability in Fiscal Framework
Chancellor Rachel Reeves is facing mounting pressure to maintain her current fiscal rules as debates intensify over potential reforms to accommodate long-term investments and increased defence spending. Richard Hughes, the most recent chair of the Office for Budget Responsibility (OBR), has publicly urged Reeves to see her fiscal rules through the entire parliamentary term, warning against frequent changes that have plagued previous administrations.
Growing Tensions Between Stability and Reform Advocates
Hughes, appearing before the Treasury Committee alongside fellow former OBR chief Robert Chote, expressed frustration with the short lifespan of fiscal rules historically set by Chancellors. "My heart sinks every time there is a discussion about setting a new set of fiscal rules for this country," Hughes stated emphatically. "I would like to see some of them met at some point."
The former budget watchdog chair argued that simple rules consistently followed prove more valuable than complex frameworks that governments can selectively apply. His position directly contrasts with calls from Labour backbencher Louise Haigh and analysts at the Institute for Fiscal Studies, who advocate for substantial overhauls to the entire tax and expenditure framework.
Technical Adjustments and Political Pressures
Reeves already modified the fiscal framework during last year's Budget, limiting the OBR's formal assessment of government borrowing and debt targets to just once annually. This technical change means next Tuesday's Spring Statement will feature only economic forecasts rather than comprehensive fiscal analyses of government policies and financial headroom.
Meanwhile, political pressures continue mounting from multiple directions:
- The Liberal Democrats propose exploring new defence bonds to boost military spending
- Labour backbenchers push for revised fiscal rules that better accommodate public investment
- Think tanks recommend adopting traffic light systems instead of rigid borrowing targets
Long-Term Risks and Short-Term Political Cycles
Hughes, who resigned last year following an inadvertent Budget leak, previously criticized Reeves' fiscal rules during House of Lords committee testimony. He argued the Chancellor's framework does "very little to rebuild fiscal resilience" while providing governments with "constant excuses" to loosen fiscal policy in the short term.
The Treasury Committee hearing revealed broader concerns about whether the OBR adequately accounts for growth policies unfolding over ten-year horizons. Committee members including Tory MP John Glen and Labour's Yuan Yang questioned whether the watchdog should evaluate policies with longer implementation timelines.
The Case Against Frequent Rule Changes
Hughes presented compelling data showing UK fiscal rules have averaged less than two years before being abandoned or replaced. "What is really unique about the UK fiscal rules is how frequently we abandon them," he observed. "No fiscal mandate has been around long enough to actually be measured in outturn."
Both former OBR chiefs resisted suggestions for more flexible frameworks, warning that such systems could be manipulated for political advantage while assuming discipline that often proves lacking when additional funds become available.
Robert Chote emphasized: "If you want to have an environment which is more conducive to take, and to stick to, long-term decisions, persuading people that you are not going to spend any good fortune that comes down the way and ignore any weaknesses is a good place to start."
Calls for Longer-Term Economic Perspectives
Hughes specifically urged the Chancellor to engage more seriously with the mid-year fiscal risks and sustainability report, which provides fifty-year projections addressing challenges like aging populations, climate change impacts, and technological disruptions. He expressed disappointment with the government's limited response to these forward-looking analyses, which could inform more strategic policymaking.
As the Spring Statement approaches, the tension between maintaining fiscal discipline and accommodating necessary long-term investments continues defining one of the government's most critical economic policy debates. The outcome will significantly influence Britain's economic trajectory and public finance sustainability for years to come.
