A strong OBR is in everyone’s interests

The accidental early release of the Office for Budget Responsibility’s (OBR) forecast before the chancellor had stood up to make her budget speech led to the resignation of the OBR’s chair. He now needs to be replaced.

Reeves has publicly emphasised her support for the independence of the institution, ¹¹ https://www.gov.uk/government/news/update-on-the-chair-of-the-office-for-budget-responsibility-obr  unlike some of her predecessors, and one of her first acts as chancellor was to strengthen the OBR’s powers. But it is no secret that the chancellor had a fractious relationship with the institution under Hughes’ leadership and the Treasury (in a break from normal tradition) appeared to deem OBR forecasting process ‘fair game’ in its briefing strategy ahead of the budget. The OBR has also been under attack from other Labour figures who disagree with some of its central assumptions. ¹² https://www.newstatesman.com/politics/uk-politics/2025/12/the-obr-is-pushing-us-into-a-doom-loop

Recent criticism of the OBR is misplaced

Much of the recent criticism of the OBR from across the political spectrum has focused on a concern that the OBR has been inappropriately powerful in forcing the government’s hand on major policy decisions – imposing unpleasant choices on elected officials. But this critique misunderstands the true situation.

The reason that ministers have faced unpleasant choices about tax and spending is that the UK’s economic and fiscal position is fundamentally weak – and has been for some time. This and previous governments have had to raise taxes and pare back spending because UK economic growth has been anaemic since the financial crisis and took a further hammering from Brexit and Covid. 

All the OBR does is produce independent forecasts that lay out that reality. And if, as has been the case with all recent chancellors, the government decides to adhere to some kind of self-defined ‘fiscal rules’, then those forecasts have often implied that action is required if the chancellor wants to stay on track to meet the rules.

For many years, the OBR has actually been more optimistic than most other forecasters – assuming that productivity growth would rebound towards something more like its pre-financial crisis trend, despite years of much weaker growth. This meant the OBR’s forecasts were less constraining than they perhaps should have been on government actions previously. The OBR downgraded its forecast once in 2017 but did not then do so again until the most recent budget. Its optimistic-looking forecasts in the intervening period made it easier for Reeves’ predecessor, Jeremy Hunt, to announce a cut in National Insurance Contributions in the run-up to the last election. The OBR told the Treasury Select Committee that the timing was to allow long enough after the pandemic and energy price spike to assess underlying trends. ¹⁵ https://committees.parliament.uk/oralevidence/16812/pdf/  But it is understandable that Labour felt aggrieved at the timing. However, if the OBR had simply not downgraded its forecast this time, that would simply have made the government’s problems worse later in the forecast period.

A strong, independent OBR is valuable for government and all of us

Without the OBR, the government might find it easier to hide the truth – presenting, as happened prior to the OBR’s existence, politically approved forecasts with unduly optimistic assumptions that allow the government to duck or delay hard decisions. But that would risk undermining confidence in the UK’s fiscal sustainability, which could come at the cost of even higher borrowing costs. 

The UK already faces higher borrowing costs than its peers and one interpretation of that is that market trust in British government remains low. ¹⁶ https://www.ft.com/content/82d16bc8-48bc-4857-a61b-e263a7b4dbc1  The OBR is considered world-beating in its transparency and the type of work on fiscal sustainability that it undertakes according to the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF), who have called it the gold standard or model for independent fiscal institutions around the world.

The government needs to appoint a strong OBR chair

Confidence in UK fiscal policy could be undermined if it appears that the chancellor chooses to replace Hughes with someone who is more sympathetic to the government’s point of view. Reasonable people can disagree about how to produce an economic and fiscal forecast and what assumptions to make. The huge benefit under Hughes and his predecessor is that the OBR’s process and assumptions have been very transparent, allowing that debate to happen openly, unlike what happened prior to 2010 when the forecasts were produced by the Treasury and signed off by the chancellor.

The next chair must be approved by both the chancellor and the Treasury Select Committee. Rachel Reeves must resist any temptation to rush the process, if that undermines its robustness – it would be better to conduct a full and rigorous search than to try to rush to get someone in place before the next forecast, due by the end of March. She should also resist any temptation to appoint a candidate who is seen as too sympathetic to the government and likely to give them an easier ride. Doing so would undermine the vital independence of the institution, which is highly valuable – if sometimes awkward – for the government and all of us. 

Reeves has stated her support for the independence of the OBR and must demonstrate this in practice by choosing an impartial chair.