The Government should overhaul the way it announces spending policies and future budgets to avoid losing the trust of the public, according to a leading economic think tank.
A new report by the National Institute of Economic and Social Research (NIESR) said the current framework has led to serious fiscal failures and more transparency is needed, including an end to serial leaking of policy decisions ahead of budgets.
Funded by the Nuffield Trust, the research also calls for Chancellor Rishi Sunak to set out a structured timetable for fiscal events and allow for greater scrutiny and debate on spending decisions to avoid errors arising.
The Treasury also needs to stop focusing so heavily on debt and deficit levels, and expand its remit to include wellbeing, job security and quality of life, it said.
Former Labour chancellor Alistair Darling, who contributed to the report, said: “Whilst a government’s approach to fiscal and monetary policy needs to be credible so it supports the wider societal aims, and flexible enough to adapt to the changing circumstances of the day, it must also be transparent. Governments need to be open about what they are doing and why.”
Another contributor, former Tory chancellor Lord Lamont of Lerwick, added: “Whilst no-one can be sure what the future holds, it is clear from this authoritative study that any future framework should be based on a collection of clear principles, born from a clear strategy concerning expenditure, and agile enough to adapt to the unknown.”
Mr Sunak has faced criticism from the Government’s own independent economic advisers at the Office for Budget Responsibility (OBR) for failing to set out longer-term spending plans at the last Budget.
Many of the policy announcements at the Budget last month were also leaked sometimes up to two weeks in advance of the statement, while requests for clarity in other areas to support businesses were ignored until Budget Day.
NIESR director, Professor Jagjit Chadha, said: “Politicians would benefit because their credibility would be much higher if they conducted this more seriously. The leaking is really very tactical and I think it reflects badly on them in the wider debate.”
He added: “Has the process of fiscal policy as we’ve been setting it for the last quarter of a century worked for the British economy?… I think in many areas we’ve found many failures.
“It may work for politicians but it hasn’t worked for the economy and that really worries us.
“An economy that hasn’t performed as well as it otherwise might’ve done will in the end lead to frustrations that will manifest themselves.
“The political volatility we have in the UK is not unconnected or disconnected to the economic failures we’ve had in the last 25 years.”
Deputy director Hande Kucuk of NIESR pointed out that the Covid-19 furlough scheme extension until September could have been announced far earlier and prevented redundancies last summer.
She explained: “Until the very end of October (2020) we didn’t know that it was going to be extended. It was extended last minute and there were lots of redundancies running up to that.
“Instead, if the Chancellor had announced that the furlough scheme’s duration would be conditional on the pandemic and the lockdown, the policy would’ve been more effective. So, giving more guidance… could have reduced uncertainty and given greater confidence to the public.”