OBR should focus more on policy growth ‘upsides’ – says Tony Blair think tank
The Government must force the Office for Budget Responsibility (OBR) to take more account of policy “upsides” when assessing an impact on growth, Tony Blair’s think tank has said.
The Treasury watchdog should be required to be bolder in predicting growth to reward more ambitious economic policies, a report by the Tony Blair Institute (TBI) suggested.
The OBR is widely expected to downgrade its economic and productivity forecasts ahead of the Budget, which will likely leave Reeves with a fiscal black hole of more than £20bn.
The report said the Government should force the OBR to produce two forecasts rather than one, which would see it publish its existing independent baseline and a second more optimistic prediction on growth dubbed the “Upside Policies Scenario”.
This framework would allow the OBR to reward risky policies and enable politicians to make a better pro-growth case to the public.
This new system would also encourage politicians and the public to view budgets as opportunities to generate growth rather than tax-and-spend fiscal exercises, the think tank said.
Growth needed to raise living standards
The report called on the Treasury to be bolder in incentivising economic growth by introducing a raft of pro-business policies.
Tom Smith, director of economic policy at the TBI, said: “Only a bold, pro-enterprise plan can lift living standards, strengthen the public finances and give the government the fiscal room for the changes voters want. Progressive policy tomorrow demands a pro-business growth plan today.”
The TBI report also drew up a number of other pro-growth – but potentially costly policies – for the Chancellor to consider.
The government should scrap stamp duty on shares to bring the UK in line with its global competitors by encouraging more trade, the report said.
The UK currently charges a 0.5 per cent transaction tax on all purchases, while no such tax exists in the United States, Germany or Japan.
The Government should also “reward enterprise” by extending full expensing across asset classes, overhauling property and business tax, and creating an “AI trade advisor” position to encourage the tech sector.
In September, Morning Wire revealed the Treasury is considering a TBI proposal for stamp duty on houses to be staggered rather than paid as a lump sum.
Fiscal discipline can go too far, Reeves warned
The think tank has warned Reeves she must pair fiscal discipline with bold economic policies to break the “tax-and-spend doom loop”.
The Government should modernise employment law and loosen its migration rules to create a more flexible job market, the report said.
It also urges Labour to go further in cutting red tape around planning, by fast-tracking “nationally significant” projects such as AI data centres.
In a speech on Tuesday, Rachel Reeves struck a sombre tone when she hinted at tax rises in the budget.
Labour is refusing to rule out breaking its manifesto pledge not to raise income tax, and has been urged to do so by several think tanks.
Smith said: “The Chancellor acknowledges she has tough choices to make. She cannot satisfy the markets, the party, business and voters all at once.
“The only way to do so over time is to put Britain back on the path to growth — and that means a new bargain between government and business.”