Rachel Reeves must overrule the "economic straitjacket" of Britain’s spending watchdog ahead of the Autumn Budget, a senior Labour MP has warned.
Ex-Transport Secretary and prominent backbencher Louise Haigh has demanded that the Chancellor “rewrite the rules” to stop ministers from being forced to govern “with one hand tied behind their back.”
In a scathing attack on the Office for Budget Responsibility, Ms Haigh suggested that the OBR’s overreach had hindered the Government’s ability to deliver on its agenda.
This comes ahead of the Autumn Budget in November, with Britons bracing for tax rises to plug a black hole which could be as high as £50billion.
The Chancellor has been urged to U-turn and strip back the watchdog's powers amid fears of a £50billion tax raid
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A reduction in the OBR’s power would mark another U-turn for the Chancellor as she campaigned for the opposite in the run-up to last year’s General Election.
Ms Reeves pledged to strengthen its remit in response to Liz Truss’s 2022 "mini-budget", which was delivered without an independent forecast.
A law was then passed last September which meant the OBR could make assessments on any major taxation or spending event.
The Treasury said at the time this would help to provide "stability".
MORE ON RACHEL REEVES:
Louise Haigh has demanded that the Chancellor 'rewrite the rules'
| PAWidely tipped for the role of deputy Labour leader before ruling herself out on Monday, Ms Haigh argued that small changes in the OBR’s economic forecasts forced ministers to make big and often unexpected policy changes.
According to the senior MP, the failed benefits reforms which triggered a backbench rebellion were as much “a failure of process as much of policy,” as the Government was pressured to align with the OBR’s spring assessments.
She recommended that the OBR deliver only one set of forecasts each year instead of two, publishing more long-term projections rather than five-year forecasts.
Writing in the New Statesman, she said: “A Labour Government with a landslide majority in Parliament cannot - and should not - be stopped from delivering the change we clearly set out in our manifesto simply because of assumptions made by the OBR.
"If we let unelected institutions dictate the limits of change, we betray the people and communities who put their trust in us.
Nigel Farage hinted earlier this year that a Reform Government would rip up the OBR
| GETTY“Economic circumstances and excessive deference to independent institutions are frustrating the democratic demand for change.
"From the debt legacy left by the Conservatives to the rigid orthodoxy of the OBR, we are being forced to govern with one hand tied behind our back."
She added that “its models often underestimate the long-term returns of public investment and ignore the wider benefits of progressive taxation or public ownership.”
Last month, left-leaning think tank the New Economics Foundation proposed an overhaul of Britain’s fiscal framework which also included the abolishing of the independent watchdog.
Nigel Farage also hinted earlier this year that a Reform Government would rip up the OBR as part of his restructuring of the institutions which govern British economic policy.