Let UK Budget Watchdog Cost Opposition Policies, Ex-Chair Says

(Bloomberg) -- Britain’s independent budget watchdog should be given the power to cost opposition party policy commitments before an election, its former chairman said.

Most Read from Bloomberg

• US, Europe Growing Alarmed by China’s Rush Into Legacy Chips

• Charles Koch-Tied Group Seeks to Block Trump From GOP Nomination

• Asia’s Richest Families Fuel Race for Lucrative Finance Jobs

• Singapore PM to Address Political Scandals in Parliament

• Stock Rally Takes a Break as Treasury Yields Climb: Markets Wrap

Robert Chote, who ran the Office for Budget Responsibility from 2010 to 2020 and is now chairman of the UK Statistics Authority, told Bloomberg that “in principle, it is a good idea.”

His comments are likely to revive calls to expand the role of the OBR ahead of a general election expected next year. Under the current framework, the arbiter of the public finances can only review government policy, leaving the claims of rival parties open to greater challenge.

The importance of the OBR was demonstrated last year when then-Prime Minister Liz Truss launched massive tax cuts without an OBR forecast. The subsequent bond market crash that cost Truss her job was blamed in part on her decision not to seek an official assessment of the impact the plans would have on growth and borrowing.

Opposition parties rely on their own researchers and think tanks to provide costings. These are usually disputed by the party in power, which has access to civil servants and information held inside government.

Labour, which has a double-digit lead over the ruling Conservatives in opinion polls, has long demanded the credibility of an OBR assessment.

The party asked for a policy costing in 2015, and promised to change the OBR remit if it won the 2019 election. The Netherlands, Australia and Ireland all let their budget watchdogs cost opposition party policies before an election.

In 2015, then-Chancellor George Osborne refused Labour’s request but four years later, as editor of the Evening Standard newspaper, he said he regretted the decision. “I didn’t want to politicize the new independent institution. But I was being too cautious. It would clearly help voters if they had impartial information on the parties’ commitments,” he wrote.

‘Practical Challenges’

Chote said there were “lots of practical challenges” before the OBR could cost all parties’ policies, not least staffing. The Dutch budget watchdog has more than three times as many staff as the OBR, which employs 45 people and gets help from Treasury officials.

Labour declined to comment on whether the party wants its next manifesto cross-checked by the OBR. It has promised “a new enhanced role” for the OBR as well as a new Office for Value for Money to keep an “eye on how public money is spent.”

Tomasz Wieladek, chief European economist at T. Rowe Price, said on Friday an enhanced OBR could include an independent “fiscal policy committee” that sets borrowing limits “consistent with a declining path of public debt over a three-year horizon.” The government would set tax and spending plans within those parameters.

Wieladeck said the proposal would encourage parties to make growth-enhancing policies because boosting the economy would allow them “to spend more in net terms.” He added: “An ironclad commitment to debt sustainability could mitigate the risk of a future gilt market crisis.”

Most Read from Bloomberg Businessweek

• Influencers Built Up This Wellness Startup—Until They Started Getting Sick

• AI in Hollywood Has Gone From Contract Sticking Point to Existential Crisis

• The Stainless-Steel Boom Is Tearing a South African Mining Region Apart

• Economist Behind Popular Recession Gauge Worries She Created a ‘Monster’

• What China’s Real Estate Market Will Look Like in Five Years

©2023 Bloomberg L.P.