The Role and Powers of the UK Office for Budget Responsibility
The Office for Budget Responsibility (OBR) plays a crucial role in forecasting the Budget’s policy costs and monitoring compliance with fiscal rules, providing forecasts twice yearly alongside the Budget and Spring Statement. Created in 2010 during the coalition government and granted statutory status in March 2011, the OBR has been central to debates around austerity and market credibility, especially highlighted following the 2022 mini-Budget.
The OBR is chaired by Richard Hughes, a Harvard-educated former Treasury official, and the Budget Responsibility Committee also includes Tom Josephs and Professor David Miles, with backgrounds in the Treasury, Bank of England, and Morgan Stanley respectively. In 2024, a law passed by the Labour government expanded the OBR's powers, enabling it to initiate forecasts independently, access Treasury data, and scrutinize departmental spending. This legislation was prompted by issues arising from the 2022 mini-Budget and aims to increase the credibility of UK tax and spending policy by enhancing the OBR’s independence and influence.
Despite these expanded powers, Chancellor Rachel Reeves has stressed that the OBR’s role is to forecast the economy and not to run government policy, amid ongoing tensions about the OBR’s influence. There is a public debate regarding the institution’s power, with some critics arguing that the unelected OBR constrains government ambition.
In its recent forecasts, the OBR downgraded UK productivity by 0.3 percentage points in October, a change that the Institute for Fiscal Studies estimates could increase borrowing by about £21 billion in 2029-30. Additionally, the government intends to measure fiscal headroom only once a year starting from this Budget in an effort to reduce speculation about tax rises, although the International Monetary Fund emphasizes that higher headroom supports credibility in financial markets.
