Key Takeaways:
- The Office for Budget Responsibility (OBR) complained to senior Treasury officials about a flurry of leaks that spread "misconceptions" about its forecasts before the budget.
- The OBR’s chair, Richard Hughes, resigned after the inadvertent release of its budget documents, but the prime minister’s official spokesperson denied that he was forced to go.
- The OBR published a letter to clarify the evolution of its forecasts over time, which prompted a row about the chancellor’s account of the backdrop to her budget decisions.
- The OBR denied that the chancellor was misleading in her pre-budget speech, but highlighted two "misconceptions" about its forecasts.
- The OBR’s decision to reassess its forecasts for the economy’s underlying productivity outlook was defended as necessary to wait until the impact of big economic shocks had faded.
Introduction to the OBR’s Complaints
The Office for Budget Responsibility (OBR) has complained to senior Treasury officials about a flurry of leaks that it said spread "misconceptions" about its forecasts before the budget. Prof David Miles of the OBR’s budget responsibility committee told MPs on the Treasury select committee that the watchdog had raised the issue of leaks with the department before the chancellor’s statement last week. Miles stated that the leaks were not helpful and that the OBR was not in a position to correct them. This complaint comes after the OBR’s chair, Richard Hughes, resigned on Monday, taking responsibility for the inadvertent release of its budget documents about an hour before the chancellor’s statement.
The Resignation of Richard Hughes
The prime minister’s official spokesperson insisted that Hughes was not forced to resign, stating that it was "categorically untrue" that he was pushed out. The chancellor has written to Hughes, thanking him for leading the OBR and his many years of dedicated public service. However, the resignation follows a row about the OBR’s forecasts and the chancellor’s account of the backdrop to her budget decisions. The OBR published a letter that took the "unusual step" of spelling out the evolution of its forecasts over time, prompting a furious row about the chancellor’s speech.
The OBR’s Letter and Forecasts
Miles denied that the OBR’s letter showed the chancellor was misleading in her pre-budget speech, in which she underlined the perilous state of the public finances. He stated that the OBR’s forecasts "didn’t suggest that the fiscal outlook was problem-free" and described the margin for error, or headroom, on the chancellor’s fiscal rules as a "sliver" and "wafer thin". Miles highlighted two "misconceptions" about the OBR’s forecasts: the idea that it had shifted the time period over which it assesses the yields on government bonds, or that its forecasts had swung dramatically at the last minute, affecting the government’s decision-making.
The Impact of Leaks on Economic Growth
Miles told the Treasury committee that the slew of leaks may have hit economic growth by exaggerating consumer and business uncertainty, which "may well have been exacerbated by leaks which some days seemed to be suggesting one thing and the next day something different". He added that this uncertainty "may not have helped" the economy. The OBR’s decision to reassess its forecasts for the economy’s underlying productivity outlook was defended as necessary to wait until the impact of big economic shocks had faded. Miles stated that it would have been "trigger-happy" to move earlier and that the OBR’s forecasts had gradually improved a little bit in the run-up to the final ‘pre-measures’ forecast.
Defense of the OBR’s Independence
The Bank of England governor, Andrew Bailey, defended the OBR’s independence, stating that it was created to ensure there was a source of independent forecasting and an independent assessment of fiscal policy. He added that attacks on the OBR’s independence were unfounded and that the principle of independence should be remembered. Hughes’s predecessor, Robert Chote, also added his voice to concerns about the volume of leaks, stating that ministers and officials should focus on the substance of the budget rather than trying to manage expectations or provide a running commentary on the forecast.
Conclusion and Final Thoughts
In conclusion, the OBR’s complaints about leaks and the resignation of its chair have highlighted concerns about the independence and integrity of the watchdog. The OBR’s letter and forecasts have prompted a row about the chancellor’s account of the backdrop to her budget decisions, and the impact of leaks on economic growth has been significant. The defense of the OBR’s independence by the Bank of England governor and Hughes’s predecessor has emphasized the importance of maintaining the principle of independence in fiscal policy. As the UK economy continues to face challenges, it is essential that the OBR’s forecasts and assessments are trusted and respected, and that the government and officials prioritize the substance of the budget over managing expectations and providing a running commentary on the forecast.