Fiscal watchdog ready to publish forecast for new PM’s spending plans
The UK’s fiscal watchdog has confirmed it is ready to publish a mini-forecast alongside any fiscal announcement the next prime minister might wish to make in September.
Earlier this week, the Commons Treasury Committee wrote to the Office for Budget Responsibility (OBR) and to the Chancellor to ask if it is preparing for an emergency Budget in September.
Liz Truss, the frontrunner to succeed Boris Johnson as prime minister, has promised to cut taxes immediately to help households with the cost-of-living crisis if she wins the race.
She has said she would do so in a so-called fiscal event, but according to reports she would not request an accompanying economic forecast from the OBR.
On the other hand, the team of her opponent Rishi Sunak has argued Ms Truss would be taking irresponsible risks with the public finances by not involving the OBR in any early package of measures.
The Treasury usually gives the OBR 10 weeks’ notice of a fiscal event, such as a budget, to enable it to provide an independent forecast of the economy and the UK’s fiscal position.
In response to the committee, the OBR confirmed it began work on a forecast on July 29, following agreement with the Treasury, and would be in a position to publish such a forecast alongside a potential emergency fiscal event in September.
While the forecast may not be as comprehensive as at previous budgets – due to tight timescales – the OBR said it is committed to providing the most complete picture of the economic outlook as possible, and to a standard that meets the requirements of the OBR Charter.
In summary, if asked by the new chancellor to produce a forecast on September 14 or 21, we would be able to do so
Office for Budget Responsibility
In a letter addressed to the Conservative chair of the Treasury Committee Mel Stride, OBR chair Richard Hughes said: “In summary, if asked by the new chancellor to produce a forecast on September 14 or 21, we would be able to do so to a standard which meets the legislative requirements of the Act and Charter.
“We have already, with the Treasury’s’ agreement, commenced the preparatory work which would enable us to publish that forecast.
“As with other forecasts produced to an exceptionally accelerated timetable, they would provide less complete analysis supporting the key judgments, less detailed breakdowns of the key economic and fiscal aggregates, and less contextual and supplementary information than in our EFOs (Economic and Fiscal Outlooks) produced in normal times.
“But we would do our best in the time available to give the Government, Parliament, and the public the most complete and up-to-date picture of the economic and fiscal outlook as possible.”
Commenting on the correspondence, Mr Stride said: “As a committee, we have emphasised the importance of major permanent tax changes and other very significant fiscal measures being announced at fiscal events alongside an OBR forecast published at the same time.
“These forecasts provide transparency on the health of the nation’s finances to Parliament, the public and, critically, to international markets upon which the UK substantially relies for its borrowing.
“It is therefore reassuring to hear that the OBR has already started this important work and stands ready to provide a forecast in time for an emergency fiscal event next month.
“Given the very significantly increased economic challenges since the OBR’s last forecast in March and the likely significant measures to be brought forward in September by whoever becomes our next prime minister, it will be vital that the OBR is requested by whoever is Chancellor in the new Government to publish as full a forecast as possible at that time.”
Mr Stride, who backed Mr Sunak in the contest, had earlier argued that “to bring in significant tax cuts without a forecast would be ill-advised” and “it is effectively ‘flying blind’”.
In his response to the committee, Chancellor Nadhim Zahawi also stated that while this preparatory work has begun, the decision to set a date for a new forecast is for the incoming chancellor.
The OBR’s response puts the new government in the position of having to formally reject its offer.
Conservative MP Kevin Hollinrake, a member of the Treasury Committee and a supporter of Mr Sunak, told the PA news agency it would be “wrong” for Ms Truss to reject the forecast.
The MP for Thirsk and Malton said: “I think it’d be wrong to do that (not ask for an OBR forecast). Because surely, nobody in the world of politics should be afraid of scrutiny.
“Transparency is key and being able to understand the implications of a policy is key, and you shouldn’t make policy based upon ideology. You should make it based upon evidence, and this is evidence that should be taken into account.
“I can’t see why any future prime minister would not take the opportunity to have their plan scrutinised.”
On the OBR confirming that it has started working on a forecast for the UK economy, shadow Treasury minister Pat McFadden said: “While families and pensioners have been worrying about making ends meet, Liz Truss and Rishi Sunak have been playing fantasy economics. It’s time for them to get a reality check.
“There’s no excuse for our next Conservative prime minister to try and wriggle out of proper scrutiny before announcing any cost-of-living measures this September.
“Labour has a plan to face this crisis and make sure no one pays a penny more on their energy bills, while securing our economy for the future by insulating 19 million homes and kickstarting the green growth we need.”