Opposition policy costings based on assumptions chosen by ministers’ special advisers have little value and should instead be overseen by the independent Office for Budget Responsibility, argues Gemma Tetlow
You know the election countdown has begun when the Treasury starts releasing costings of opposition policies 7 https://www.gov.uk/government/publications/opposition-policy-costings-2024 . Last week we were treated to the first of these, including a costing for the Labour party’s National Warm Homes Plan.
These documents purport to provide the public with information about the likely cost of policies that opposition parties have announced. Civil servants produce the estimates of the cost of opposition policies at ministers’ behest, but they are based on assumptions chosen by ministers and their special advisers. As a result, they are partial at best and can be extremely misleading – though these shortcomings can be masked by the fact they are published by the Treasury as official government documents and described as such by ministers. Last week’s document was a classic of the genre 8 https://twitter.com/TorstenBell/status/1755205577230131244?s=20 .
High quality opposition policy costings would help opposition parties and inform the electorate
General election campaigns in the UK have long been dominated by the cost of parties’ tax and spending promises and debates about whether their plans “add up”. Prior to the election period, the party in power currently enjoys a huge advantage over rivals: it can make use of civil servants and the information held in government to understand, in detail, the costs of opposition spending promises and the costs or revenue raised from their tax proposals. Opposition parties, on the other hand, must rely on think tanks and their own researchers to try to estimate the relevant figures, leaving them open to greater challenge.
Allowing government resources to be used to produce better costings of opposition polices has the potential, therefore, to help both opposition parties themselves (enabling them to better understand the impact of the policies they are considering) and the electorate (allowing them to make a more informed choice). However, the costings that are currently produced serve neither function. Because the process is owned by government ministers, who dictate what assumptions should underpin the costings, the costings rarely reflect the most reasonable interpretation of the policies being proposed.
Opposition policy costings should be overseen by the OBR, not ministers
To ensure that such costings provide useful information and incorporate the most reasonable set of assumptions, the process needs to be independent of government ministers. The process would be more robust and engender greater trust across the political spectrum if it were overseen instead by the Office for Budget Responsibility, the UK’s independent fiscal watchdog. It has the expertise and independence from government required to reach a well-informed, dispassionate judgement about the appropriate assumptions to make in costing policies. This is exactly what it does when approving costings of government policies announced at fiscal events.
But this would not be straightforward. The least radical option would be for the members of the OBR’s Budget Responsibility Committee to decide what assumptions should be made and to quality assure the costing, but for most of the work to produce the policy costings to continue to be done by civil servants and for government ministers to continue to be the only ones able to commission this work. This is broadly how costings of government policies are done for fiscal events – most of the work is carried out by civil servants, mainly in HM Revenue and Customs and the Department for Work and Pensions, with OBR staff reviewing and challenging the figures to ensure their robustness and quality. Producing opposition policy costings in this way would be similar to the model in Ireland – albeit, there, other political parties can ask officials in the Department of Finance to cost their policies. The OBR would require some extra staff for this model.
A more radical option would be for opposition parties to be able to ask for such costings. But this would require a big shift from the current duty of civil servants in the UK to serve the government of the day. Ministers – some of whom are already sceptical about the time taken up with access talks – may question how much time civil servants would need to devote to this task. This problem could be mitigated if instead the OBR did all of the work itself. However, this would require the OBR to have far more than its current contingent of around 50 staff and greater direct access to government data. This would be similar to the model in the Netherlands, where the Bureau of Economic Analysis (CPB) performs this function, among others, with 125 members of staff.
There are obvious potential benefits to moving oversight of opposition policy costings from ministers to the OBR, but it would not be a simple task. Such a change would need to be carefully considered to ensure the OBR continues to be – and is seen to be – politically independent and trusted by all political parties, and that civil servants’ lines of accountability are clear. However, without such a change, all opposition policy costings released by the government should be treated with extreme caution.