Bank of England Governor Cautions Against Undermining Fiscal Watchdog Integrity

The Governor of the Bank of England has issued a warning over recent criticism of the Office for Budget Responsibility amid rising tensions between the fiscal watchdog and Chancellor Rachel Reeves. Emphasising the importance of maintaining an independent assessment of UK fiscal policy, Andrew Bailey reminded policymakers and the public alike that the OBR was established to provide impartial forecasting and evaluation, a feature essential not only for Britain but for other economies as well.

Mr Bailey highlighted that attacks on the OBR challenge the very principles underpinning its creation. In the lead up to the recent Budget, Treasury briefings suggested that large tax increases were necessary to address what was described as a multibillion pound deficit in public finances. However, the OBR subsequently disclosed that the Treasury was advised in September that the Chancellor faced only a modest shortfall of £2.5 billion, a gap that soon became a modest surplus as projections improved.

David Miles, a representative from the OBR, told the Treasury select committee that leaks and briefings from the Treasury had been damaging, exacerbating market uncertainty and potentially undermining growth. Professor Miles indicated that the OBR had communicated these concerns directly to the Treasury. Rachel Reeves has rejected suggestions that she misled the public regarding the scale of the deficit, with Labour leader Sir Keir Starmer publicly standing by her statements.

The situation has further intensified following the resignation of Richard Hughes as OBR chairman after a Budget leak. Critics, including Conservative leader Kemi Badenoch, allege that Mr Hughes was made a scapegoat and suggest that Labour sought to silence dissent within the watchdog. The Treasury has since criticised the OBR for making internal discussions public, emphasising the need for confidentiality in policy and forecast debates.

Mr Bailey noted that the Bank of England has followed the developments closely to identify any lessons applicable to their own processes. The OBR, set up in 2010, has previously faced criticism from senior political figures, notably during Liz Truss’s leadership campaign. The Bank of England has consistently drawn attention to the risks posed by undermining the independence of key fiscal and monetary institutions, referencing similar challenges faced by central banks elsewhere.

As debate continues over fiscal transparency and the autonomy of public watchdogs, the comments from the Bank of England Governor serve as a call for reflection on the foundations of economic governance in the UK.