Treasury Select Committee Chair Questions OBR on Forecast Shifts Amidst Reeves‘ Tax Policy Reversal
the Office for Budget Responsibility (OBR) is facing scrutiny from the Treasury Select Committee over alterations to its economic forecasts in the lead-up to the Autumn Statement, coinciding with a significant policy shift by Shadow Chancellor Rachel Reeves regarding Labor’s planned tax policies. Committee Chair Harriett Baldwin has formally requested detailed explanations from OBR chief Richard Hughes regarding the timing and nature of these revisions, raising concerns about the independence of the forecasting process and potential expectation management from the treasury.
The inquiry stems from briefings suggesting the OBR’s central forecasts changed substantially after initial rounds of analysis in October, just before Reeves announced Labour would be abandoning a commitment to match the government’s current spending plans - a move widely interpreted as necessitating tax increases. This reversal followed reports of the OBR’s forecasts indicating limited fiscal space under a Labour government,perhaps jeopardizing key spending pledges. The committee’s questions center on whether the OBR’s assessments were influenced by, or responsive to, political developments and Treasury communications.
The OBR’s forecasts are crucial as they underpin the government’s Budget and provide an independent assessment of the UK economy, factoring in areas like productivity growth, wage increases, inflation, and labour market dynamics. The effects of Budget policies are assessed in the weeks preceding the statement. Though, the timing of the reported forecast swings, coupled with leaks from the Treasury regarding Budget plans, has prompted questions about the integrity of the process.
Independent economist Julian Jessop has stated the reported changes “didn’t add up,” fueling speculation about external pressures on the OBR. Reeves herself has publicly condemned the leaks as “unacceptable,” while Labour Leader Keir Starmer warned that such “distractions” could derail the government’s policy objectives. Baldwin’s letter specifically addresses concerns about these leaks and apparent attempts at expectation management.
The committee’s examination aims to clarify the OBR’s methodology, the independence of its assessments, and the extent to which external factors may have influenced its forecasts – a matter of significant importance for maintaining public trust in the UK’s economic policymaking process. The outcome of the inquiry could lead to recommendations for strengthening the OBR’s independence and transparency.