"For a crew of 50-odd nerds sharing an uninspiring concrete block in Westminster with the Ministry of Justice, the Office for Budget Responsibility has come to wield extraordinary power. It was the OBR projections of Rachel Reeves's evaporating headroom that left the chancellor scrambling for welfare cuts in March. And it is the watchdog's rethink about productivity growth that means the chancellor is sure to deliver a second tax-raising budget on 26 November."
"The Treasury is determined to avoid being dragged around by the OBR in 2026. And so, as she draws up a revenue-raising package, the chancellor is aiming to accumulate more headroom against her fiscal rules, so that every 1bn shift is less make-or-break; and to downgrade the status of the OBR's spring forecast. Set up during the Tory-Lib Dem coalition, the independent forecaster was meant to prevent politicians from tweaking economic forecasts to suit their own ends."
"As Labour came to power it embraced the new system, now 15 years old, with Reeves even legislating to prevent future fiscal events taking place without an OBR forecast, as she sought to remind voters of Liz Truss's catastrophic tenure. Labour saw complying with the the watchdog's strictures as a crucial signal to investors in government bond markets that the incoming administration had a clear plan for fixing the public finances."
"Led by the former Treasury and International Monetary Fund (IMF) official Richard Hughes, recently reappointed for a second five-year term, the OBR produces two forecasts a year by law, measuring the chancellor's tax and spending plans against her fiscal rules. With Reeves's tricky second budget approaching, it is the OBR's decision to revisit its long-term assumptions about productivity growth that is causing alarm in No 11."
The Office for Budget Responsibility (OBR) now exercises decisive influence over UK fiscal policy by shaping projections that force budget adjustments. OBR estimates of evaporating headroom prompted welfare cuts earlier in the year and its rethink on productivity growth is driving a second tax-raising budget in November. The Treasury plans to build additional fiscal headroom and downplay the spring OBR forecast to reduce forecast-driven vulnerability. The OBR was established to prevent political manipulation of economic forecasts, produces two legally mandated forecasts annually, and is led by Richard Hughes after a recent reappointment. The productivity reassessment threatens longer-term public finance projections around 2030.
Read at www.theguardian.com
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