The Role and Influence of the Office for Budget Responsibility in UK Economic Policy
The Office for Budget Responsibility (OBR), a small office housed within the Ministry of Justice, has become a significant force in UK economic policy, prompting debate over its expanding power. Originally created in 2010–11, the OBR was strengthened by the Labour government through the 2024 law following the disruption caused by the 2022 mini-Budget. The law granted the OBR new powers including the ability to initiate forecasts without government requests, access Treasury data, and challenge assumptions about departmental spending.
OBR chair Richard Hughes emphasises that the office's powers are limited to producing forecasts, scrutinising policy costs, and assessing if the chancellor meets fiscal rules, noting that the chancellor retains the ability to alter rules and policies. The chancellor appoints the three members of the Budget Responsibility Committee with the consent of the Treasury Select Committee, a measure intended to strengthen the OBR’s independence as part of Labour’s reform. The committee currently includes Hughes, Tom Josephs, and Professor David Miles, all with relevant Treasury, Bank of England, and Morgan Stanley backgrounds.
While supporters highlight the OBR’s role in providing transparency and fiscal discipline, critics argue it is unelected and wields excessive power, raising concerns about the emergence of a "fiscal technocracy" that could constrain growth-oriented economic policies. In October, the OBR downgraded productivity forecasts by 0.3 percentage points. The Institute for Fiscal Studies (IFS) warns that a 0.1 percentage point downgrade could add around £7 billion to government borrowing by 2029-30, implying that the 0.3-point downgrade might add around £21 billion.
The OBR has also shifted to annual headroom calculations to reduce speculation about tax rises driven by its forecasts. The International Monetary Fund advises maintaining higher headroom to avoid a "doom loop" scenario, while Bank of England Governor Andrew Bailey publicly supported the OBR during the financial turbulence following the 2022 mini-Budget.
