Rishi Sunak’s multibillion-pound economic response to Covid-19 has been criticised for lacking transparency by the incoming head of the Treasury’s independent tax and spending watchdog.
Richard Hughes, the economist picked by the chancellor to lead the Office for Budget Responsibility, told MPs on the Commons Treasury committee that taxpayers lacked enough information to know whether the measures outlined by Sunak at last week’s summer statement would be cost effective.
Issuing a warning a week after the chancellor’s summer economic update, he said: “The public don’t get to see what impact the government’s policy package is likely to have on the economy.”
Hughes, a researcher at the Resolution Foundation, who is set to replace Robert Chote as chairman of the OBR in October, said the public had been left with “some kind of puzzle” to decode due to the lack of independent forecasts published alongside Sunak’s announcements.
He said there was a “big question” hanging over how many jobs would be saved by Sunak’s policy to pay £1,000 bonuses to businesses that bring back workers from furlough – the single biggest policy announced by the chancellor last week, at a cost of up to £9.4bn to the public purse.
“There’s a big question about what is going to be the impact of the job retention bonus on employment, for example. Because we don’t have an employment forecast produced by the OBR, we can’t see that. It’s not part of the policy debate we can actually have at the moment,” he said.
Last week, the head of HMRC, Jim Harra, questioned the cost effectiveness of the chancellor’s spending measures, while the Institute for Fiscal Studies thinktank said the policies were poorly targeted and badly timed.
Since its creation in 2010 under George Osborne the OBR has been legally required to produce two sets of forecasts a year for the economy and public finances, which take account of the impact of government tax and spending decisions – usually to coincide with the budget and spring or autumn statement.
Despite promising to boost spending by up to £30bn, Sunak did not set up last week’s summer economic update as a full-blown fiscal event, meaning the OBR was not called upon to produce forecasts.
The chancellor’s emergency spending measures at the onset of the crisis also did not come with OBR estimates, although the watchdog has since estimated the price tag at £132.5bn. The OBR is due to update its forecasts on Tuesday, although it will not take account of Sunak’s latest measures because it was not informed about them in time.
Earlier this year the OBR rushed out two sets of economic forecasts in a week to meet its legal requirement to publish twice each financial year, after Brexit and the December election meant that 2019 was the first year without a budget since at least 1900.
Hughes said he appreciated that ministers needed to respond quickly to Covid-19, making it harder to always link up with the OBR, but warned ministers to return to a more normal system by the time of the autumn budget. He added: “It really is important to get back to that as a sort of principle of transparency.”