Louise Haigh doubles down on demand for OBR overhaul
Former transport secretary and vocal soft-left backbencher Louise Haigh has issued another plea for Chancellor Rachel Reeves to overhaul the Office for Budget Responsibility a week before the Spring Statement.
In a swipe at the Chancellor’s management of the UK economy, Haigh argued that mandating the watchdog to produce five-year forecast windows “risks entrenching decline”.
The soft-left Labour MP said Reeves should consider introducing a 10-year forecast window that can “prioritise investment” and offer the government an incentive to adopt more policies aimed at boosting supply.
Her comments heap pressure on Reeves to take a more radical approach after she tweaked her fiscal rules to make the OBR publish a new set of economic forecasts at the Spring Statement without scoring them against borrowing and debt rules.
Haigh wrote in the New Statesman: “Limited account or credit is given to other means of reducing debt over time.
“Proper service reform, which tests and learns how best to meet the needs of the public in the most efficient way possible, takes years to pay off, well beyond the forecast period.
“If a reformed OBR produced 10-year forecasts at each Budget, policymakers would be incentivised to prioritise meaningful reforms. This would not be just an excuse to borrow more, kicking the can of consolidation further down the road, but would help markets properly assess fiscal risk.”
OBR debate rumbles on
It is the second time that Haigh has taken aim at the OBR’s current setup in a written piece.
In September last year, the former Cabinet minister demanded Reeves to “rewrite the rules” while accusing the government of “excessive deference” to the OBR.
While major opposition parties have committed themselves to maintaining the watchdog, Reform UK’s economics spokesman Robert Jenrick said he would “ensure it has diversity of opinion”.
Reeves has also been presented with an alternative fiscal framework by the chief fiscal think tank, the Institute for Fiscal Studies.
In a report last week, IFS associate director Ben Zaranko suggested the government should move to a traffic lights system which asks the watchdog to score the Treasury’s management of the public finances on several different indicators.
Prior to last year’s Budget, former OBR board member and Bank of England economist Sir Charlie Bean suggested that greater emphasis should be placed on the watchdog’s mid-year fiscal risks and sustainability report.
Others have pointed to the size of debt interest paid by the government to its lenders in the bond markets.
The UK is on course to spend more than £111bn on servicing its debt in the current financial year, representing around eight per cent of total public spending and more than double the defence budget.
Committees in the House of Lords and the House of Commons are also examining the OBR’s forecasting, influence and performance.
At an appearance before the Lords’ Economic Affairs Committee, former OBR chair Richard Hughes said Reeves’ fiscal rules were “among the loosest” the country had had and that UK public finances had not built enough “resilience”.
“If anything, the rules we have at the moment are providing the government the capacity to run a quite significant structural deficit,” Hughes said.
Hughes is set to appear before the Treasury Committee on Wednesday in another hearing.