Chancellor Rachel Reeves is seeking to loosen the grip of the Office for Budget Responsibility (OBR) on fiscal policy, as tensions between the Treasury and the independent watchdog escalate ahead of the November budget. The OBR's recent reassessment of productivity growth has forced Reeves to consider further tax increases, with projections for the public finances in 2030 now expected to be between £10bn and £30bn worse than forecast in March.
Set up during the coalition government to prevent political manipulation of economic forecasts, the OBR has become a powerful force in Westminster. Labour initially embraced its role, with Reeves even legislating to require OBR forecasts for all major fiscal events. However, the watchdog's gloomy projections have left the chancellor scrambling for welfare cuts and tax rises, prompting a rethink of the relationship.
Reeves is considering reducing the OBR's spring forecast to an indicative, non-binding assessment, focusing on growth rather than fiscal targets. This would align with International Monetary Fund recommendations for a single major fiscal event per year. The chancellor has publicly backed this shift, arguing that two full forecasts annually complicate fiscal planning.
OBR chair Richard Hughes has pushed back, warning that reducing forecasts to one would make the UK "one of the least fiscally transparent countries in Europe." He noted that the government already has the option to delay policy responses if rules are breached in spring, insisting that "the government have that option now, and they always had that option."
Labour backbenchers have expressed concern over the OBR's influence, with former minister Louise Haigh calling it an "unelected institution" wielding excessive power. As Reeves prepares a revenue-raising budget, she aims to accumulate more headroom against fiscal rules to insulate herself from bond market pressures and avoid being dictated to by the watchdog in 2026.
