Chancellor Rachel Reeves is being urged to scrap the independent body responsible for providing economic forecasts and analysis by a former Government minister.
Labour MP Louise Haigh has launched a fierce attack on the Office for Budget Responsibility (OBR), declaring that “we can’t make long-term policy on short-term guesses”.
The Sheffield Heeley representative accused the fiscal watchdog of constraining elected Governments, took to X to say, “Britain needs a new economic model, not one where unelected bodies force cuts on governments elected to invest in our communities”.
Her comments underscore growing tensions between the Labour Government and the OBR ahead of the Autumn Budget on November 26.
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Labour MP Louise Haigh has launched a fierce attack on the Office for Budget Responsibility
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Ms Haigh argued that “the OBR’s forecasts are rarely accurate – even the BoE Governor admits it.”
The criticism reflects mounting frustration in Government circles at the OBR’s impact on Chancellor Rachel Reeves’s spending plans, who herself has previously called for the body to be scrapped.
Adam Smith, former chief of staff to Conservative Chancellor Jeremy Hunt, defended the OBR’s independence.
He said: “It is only weak or clueless politicians that blame the OBR.”
The former chief of staff for Jeremy Hunt however acknowledged the frustrations, but warned against scapegoating the watchdog.
He said that chancellors themselves set fiscal rules and safety margins: “If either of those things come back to haunt them, then that’s not the OBR’s fault but the chancellor’s.”
Mr Smith cautioned that attempts to bypass the watchdog would effectively amount to higher borrowing, reminding critics that “ignoring the OBR has major consequences,” citing the turmoil following Liz Truss’s mini-Budget.
Accounts from his time working in Government reveal deep disagreements between ministers and the OBR.
Rachel Reeves has previously called for the OBR to be scrapped | GETTY / OBR graph Mr Smith said the watchdog dismissed over 100 growth measures proposed before the 2023 Autumn Statement, despite Treasury estimates suggesting they would generate £20billion in annual business investment.
The OBR recognised only three policies as growth-enhancing: National Insurance cuts, permanent full expensing and welfare reforms.
He recalled officials even bringing the chief medical officer to meetings to argue that health programmes could boost labour market participation, but the watchdog “remained unmoved.”
One of the most tense clashes came ahead of the 2024 Spring Budget. When the Chancellor presented £3.4billion in NHS technology funding, OBR chair Richard Hughes reportedly told him they were “not convinced.”
One insider told the Financial Times: “We don’t know precisely what they are going to say on productivity, but we have been given indications there will be a downgrade.”
Economists estimate that a 0.1 percentage point cut to forecasts could cost the Treasury around £9billion.
Capital Economics projects a £30billion shortfall, while the National Institute of Economic and Social Research suggests Reeves may need to raise as much as £50billion through higher taxes or spending cuts.
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Labour leader Sir Keir Starmer has previously criticised how the OBR watchdog has analysed the impact of his benefit changes
Mr Smith said Labour’s complaints were ironic, given the party used the OBR to attack Truss in opposition and has since expanded its powers in government.
He said: “From the party who in opposition used the OBR as a political tool to attack Liz Truss’s mini-Budget and then in government increased its powers and responsibilities, this is more than a little ironic.”
Mr Smith warned dismantling the watchdog’s independence would allow both left and right to make unfounded claims about policy benefits without scrutiny.
He concluded: “Unless Rachel Reeves wants a return to the days when her mentor Gordon Brown and his team just fiddled the books, then she needs the OBR more than her colleagues would care to admit.”