UK's Office for Budget Responsibility Gains Expanded Independence Amid Fiscal Policy Changes
The Office for Budget Responsibility (OBR) is a small unit based in a corner of the Ministry of Justice building, responsible for analyzing budget costs, forecasting, and checking adherence to fiscal rules.
Richard Hughes chairs the OBR, which is led by three Budget Responsibility Committee members appointed by the chancellor with Treasury Select Committee consent.
In 2024, the Labour government passed a law granting the OBR new powers to initiate forecasts without government prompting, question departmental spending assumptions, and access Treasury data.
These changes followed the 2022 mini-Budget under Kwasi Kwarteng, which unsettled markets due to promised tax cuts without clear funding, leading to calls for more independent fiscal forecasting.
Critics argue the OBR is an unelected, overly powerful body, while supporters contend it brings discipline, transparency, and credibility to fiscal policy, noting the chancellor still sets policy and rules.
The OBR officially monitors spending plans and public-finance forecasts twice a year and assesses the government's likelihood of meeting fiscal rules.
Chancellor Rachel Reeves has expanded the OBR's independence to enhance credibility, emphasizing the OBR should focus on forecasting the economy rather than commenting on policy.
From this Budget onward, the calculation of fiscal policy headroom—the space for maneuver in fiscal policy—will occur only once annually. This aims to reduce speculation about constant tax rises, although the IMF argues that higher headroom helps prevent a confidence-damaging doom loop.
