Political Divide Unites Against OBR as Calls for Surplus Grow

Voices from both ends of the political spectrum are increasingly targeting the Office for Budget Responsibility (OBR), arguing that its forecasts constrain government spending capabilities. Criticism stems from both the left and right, with the OBR branded as either a bureaucratic hindrance or a tool of fiscal oppression. The ongoing debate raises questions about governmental fiscal strategy and the path toward economic stability.

Tom Harwood, deputy political editor of GB News, highlights that dissatisfaction with the OBR has been fueled by recent political events, notably the tumultuous premiership of Liz Truss. Critics argue that if governments are unhappy with the constraints imposed by the OBR’s predictions, they should strive to run a budget surplus, rather than relying on borrowing.

Historically, the OBR has been perceived as an influential agency, with the power to significantly impact fiscal policy. Supporters of the OBR assert that it serves as a necessary watchdog, ensuring that governments adhere to responsible borrowing limits. Conversely, those on the political right argue that the OBR acts as a barrier to economic growth, stifling potential tax cuts that could stimulate the economy.

The left, on the other hand, views the OBR as a legacy of former Chancellor George Osborne. They contend that it was designed to limit the fiscal capabilities of any government that might seek to invest in growth-oriented policies. Critics from both sides claim that the OBR’s forecasts can lead to undesirable outcomes, causing governments to make decisions based on anticipated economic conditions that may not materialize.

In recent years, the relationship between government borrowing and OBR forecasts has become more contentious. The political climate shifted dramatically following Truss’s leadership campaign in 2022, during which she promised not to implement major spending initiatives or socialist price controls in response to economic challenges. Yet, upon assuming office, her government announced a substantial spending package projected to cost up to £200 billion to cover energy bills.

The fallout from ignoring the OBR was swift. Following the announcement of her economic policies, gilt yields surged, reflecting the market’s loss of confidence in her fiscal strategy. Truss’s experience serves as a cautionary tale for future leaders who may consider bypassing the OBR’s guidance.

The OBR’s influence looms large over subsequent Chancellors. Each budget is now conducted under the watchful eye of the OBR, which has become an inescapable presence in fiscal discussions. As Harwood notes, the OBR only becomes a significant issue when governments pursue aggressive spending strategies that exceed their borrowing capacity.

For example, during George Osborne’s tenure, he focused on eliminating the deficit rather than maximizing borrowing potential. His approach allowed him to maintain a surplus, rendering OBR forecasts less impactful at that time. In contrast, current discussions often center around leaders like Rachel Reeves, who may struggle to balance ambitious spending plans with fiscal responsibility.

To diminish the OBR’s relevance, Harwood suggests a straightforward approach: running a budget surplus. This shift in strategy would not only ease the pressures exerted by OBR forecasts but also enhance fiscal autonomy. The bond markets respond more favorably to governments demonstrating sound financial management, which includes a commitment to reducing debt.

In conclusion, the ongoing debate regarding the OBR underscores a broader discussion about fiscal responsibility, economic growth, and the challenges that governments face in balancing these competing priorities. As political factions unite against the OBR, the call for a more sustainable approach to public finances gains momentum. The real task ahead lies in how future governments will navigate these challenges while ensuring stability and fostering growth.