Thinktanks Demand OBR Reform Ahead of Chancellor's Spring Forecast
A powerful alliance of thinktanks has issued a direct appeal to Chancellor Rachel Reeves, urging her to reform the Office for Budget Responsibility to unlock greater public investment. This call comes just before Reeves delivers her highly anticipated spring forecast on Tuesday, where she is expected to highlight signs of an emerging economic recovery.
Coalition Pressures Chancellor Amid Political Tensions
The coalition, which includes the Labour-aligned Progress group, the left-leaning New Economics Foundation and Common Wealth, alongside the feminist Women's Budget Group, argues that the current fiscal framework is outdated. They contend it promotes instability, discourages long-term investment, and fails to adequately address future risks and opportunities. This push occurs as Keir Starmer's government faces intense scrutiny following Labour's recent byelection defeat to the Greens in Gorton and Denton.
Louisa Dollimore, director of strategy at the Good Growth Foundation, which convened the group, offered a stark analogy: "The OBR is a backseat driver with out-of-date maps: it obstructs long-term planning and investment at a moment when Britain needs both."
Criticism of OBR's Role and Methodology
The thinktanks assert that the OBR's structure, established by former Chancellor George Osborne in 2010 during an era of austerity, is ill-suited for current economic challenges. They claim it often overlooks the long-term benefits of government spending, such as improved public health, better housing, and modernized transport infrastructure. Instead, its pass-fail assessments of fiscal rules can lead to rushed, consequential policy shifts.
Hannah Peaker, deputy chief executive of the New Economics Foundation, emphasized: "While independent scrutiny of the government's spending plans is important, our current system means small changes in uncertain forecasts lead to governments making kneejerk policy changes of huge consequence. This is no way to run an economy."
Recent Developments and Broader Economic Debate
Reeves has already taken steps to adjust the OBR's role, requesting that it provide its annual verdict on fiscal rules only during the autumn budget, rather than more frequently. However, the thinktanks are pushing for more comprehensive reforms. This follows last week's call from the Institute for Fiscal Studies for an overhaul of fiscal rules and echoes concerns from some economists about the OBR's approach.
Critics point to instances like the £5 billion in welfare cuts implemented in last year's spring statement as examples of hasty decision-making driven by OBR assessments. Adam Langleben, executive director of Progress, argued: "Its judgments should guide decisions, not shut down ambition. The real risk isn't investing in Britain's future, it's leaving things exactly as they are."
Balancing Fiscal Caution with Investment Needs
While Reeves has modified fiscal rules to permit more borrowing for investment and raised taxes to fund public services, some Labour MPs remain uneasy about the party's perceived caution on taxation and expenditure. This internal tension highlights the broader challenge of balancing fiscal responsibility with the demand for substantial public investment.
Contrasting views emerged last week when former OBR directors Richard Hughes and Robert Chote warned MPs that successive governments have historically overspent. Hughes, who resigned after an accidental early release of OBR forecasts, noted: "Most surprises that governments face tend to be bad ones, especially these days, and so if you don't take account of them, you're always going to end up with this upwards drift ... of deficits going up and debts going up."
As Reeves prepares to present her spring forecast, the debate over the OBR's future underscores a critical juncture in UK economic policy, pitting calls for ambitious public investment against concerns over fiscal discipline and long-term stability.
