Should the Office for Budget Responsibility Be Scrapped UK Fiscal Future Under Scrutiny

The debate over the role and relevance of the Office for Budget Responsibility (OBR) has intensified as the UK’s fiscal framework faces fresh scrutiny. The New Economics Foundation (NEF), a respected left-leaning think tank, has urged Chancellor Rachel Reeves to consider abolishing the OBR and establishing an alternative body to provide economic forecasts. Their proposal has sparked a series of discussions among policymakers, economists and market observers.

The NEF argues that the OBR exerts an outsized influence on government policy, with its economic forecasts often dictating whether the Chancellor must raise taxes or cut public spending to meet strict fiscal rules. The think tank suggests creating a new Office for Fiscal Transparency (OFT), where both the Treasury and the new OFT would publish separate forecasts. These would be jointly assessed by a fiscal policy committee, offering a broader perspective and reducing the risks of relying on a single forecaster.

Concerns over the current fiscal framework were heightened when the International Monetary Fund called on the government to avoid policy shifts in response to the OBR’s biannual forecasts. The IMF also recommended holding only one fiscal event each year for greater policy stability. The situation is complicated by the fact that even small changes to the watchdog’s growth projections can translate into significant shifts in the government’s fiscal headroom, prompting major tax or spending decisions.

Recent history underlines this point. In March, Reeves was required to announce welfare cuts after the OBR signalled that her main fiscal rule was at risk. Reeves has repeatedly stated that these fiscal rules are not open to negotiation, and Labour has even legislated to strengthen the OBR’s independence. Yet, as has happened with previous chancellors, shifting targets when the rules prove too rigid remains a political reality.

The NEF’s assessment also challenges the OBR’s methodologies, claiming the watchdog routinely underestimates the wider economic benefits of public investment and state spending. NEF posits that the OBR’s assumptions often show public investment crowding out private activity, and that state expenditure delivers limited value — an approach that, in their view, drives the UK towards a continuous cycle of debt and austerity.

Reforming the UK’s fiscal oversight structures is no simple task. The OBR was initially founded to bring transparency and independent scrutiny to public finance decisions. However, the NEF contends that the balance of power has swung too far in one direction, placing an unelected trio in charge of complex fiscal outcomes. With the next budget approaching, the debate over the OBR’s future and the proper governance of the UK’s economic policy remains firmly in the spotlight.