Labour pledges to strengthen economic watchdog within first 100 days

<span>Shadow chancellor Rachel Reeves has promised to give the OBR greater powers.</span><span>Photograph: Kin Cheung/AP</span>
Shadow chancellor Rachel Reeves has promised to give the OBR greater powers.Photograph: Kin Cheung/AP

Labour has challenged the Conservatives to match its commitment to strengthen the economic watchdog within the first 100 days of government.

Rachel Reeves, the shadow chancellor, has pledged to introduce legislation giving the Office for Budget Responsibility greater powers in Labour’s first king’s speech.

Labour’s planned law would empower the OBR to independently publish a forecast of any major fiscal event making significant tax and spending changes. The changes are intended to prevent a repeat of Liz Truss’s catastrophic mini-budget, which was delivered without an OBR forecast, by preventing ministers from “gagging” the watchdog in future.

Truss’s mini-budget included £45bn of unfunded tax cuts and caused a meltdown in the financial markets, including a collapse in the value of the pound.

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Reeves challenged Jeremy Hunt, the chancellor, to match her commitment after the Guardian published a leaked recording where he said Truss’s economic plans were a “good thing to aim for”.

Reeves told the Guardian: “Britain is still paying the price of Liz Truss’s disastrous mini-budget that crashed the economy, put pensions in peril and sent mortgage bills soaring.

“It’s clear from Jeremy Hunt’s comments that he has learnt absolutely nothing from that period and is instead pandering to the reckless voices in his party.”

Speaking ahead of this week’s inflation figures and the Bank of England’s decision on interest rates, Reeves promised: “Never again can a prime minister or chancellor repeat the chaos we witnessed under Liz Truss and Kwasi Kwarteng.”

She challenged Hunt to “show some courage” and back Labour’s plans, and warned that if he did not then he was “confirming that the biggest threat to the economy is five more years of the Conservatives”.

In leaked remarks to the Oxford University Conservatives on 9 May, Hunt can be heard saying, to some laughter, that Truss “appointed me as chancellor … you know, I want to be respectful of that fact. But I think the issue with most of the policies wasn’t that they weren’t a good thing to aim for.”

He said Truss “didn’t explain in that mini-budget how she was to fund [her tax cuts]. And so markets thought that we were just basically going to fund all these tax cuts by massively increasing borrowing. And they took fright.”

The chancellor said he hoped to “basically achieve some of the same things that she wanted to achieve. But I’m doing it more gradually because I’m demonstrating at every stage that this is consistent with keeping borrowing under control. So, it’s taking longer to get there, but I think it’s obviously in a way we can actually deliver it.”

Labour said Hunt’s remarks showed that the Conservatives had an “addiction to dangerous Trussonomics”.

A Conservative party spokesperson said: “We’ll take no lectures from the Labour party, given it was a Conservative government that created the OBR to stop Labour governments fiddling the figures and losing control of the public finances. The Labour party need to stop distracting the public from their £2,094 tax bombshell on working people.”

The Conservatives have been criticised for claiming Labour’s policies would result in a £2,000 tax hike as the figure is based on assumptions by Tory special advisers.

It came as political donation reports showed Hunt has received over £14,000 for his constituency campaign from the hedge fund manager Andrew Law, who reportedly hosted Kwarteng, the chancellor under Truss, for a champagne reception on the day of the mini-budget.

The Times reported in 2022 that Law is likely to have profited from shorting the pound in the run-up to the mini-budget, and that he hosted a reception with other financiers and Kwarteng at his west London home on the evening after it was delivered.

Records released by the Electoral Commission this month state that Law, a Tory donor and financier who is worth £750m, has donated £14,286 to Hunt’s campaign in Godalming and Ash. He gave Hunt’s local party donations of £7,143 in October and again in January. Law previously donated to Hunt’s old constituency South West Surrey.

A Liberal Democrat source said: “The Liberal Democrats are on the up in Godalming and Ash. There’s no doubt that Jeremy Hunt needs all the help he can get, but the chancellor should know better than to accept money potentially made by betting against our country.”

Law’s hedge fund, Caxton Associates, was contacted for comment.