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Should we scrap the OBR?
I find culture wars insanely boring. Obviously, that’s easy for me to say given I’m – yet – to face a serious cancellation and am not a woman whose spaces are under threat. But, still, I find it all so tedious.
Returning from the Labour and Conservative conferences, then, I’m relieved that – a sideshow about the definition of Englishness aside – politics does seem to be returning to a two-way barney about taxing, spending and growing. Andy Burnham wants a larger state and Kemi Badenoch a smaller one.
In Liverpool, the Prime Minister attacked deindustrialisation, deregulation, privatisation, austerity, Brexit and summed the country up as one ‘run for vested interests’. His solutions were straight out of the 1970s: state control of water, a publicly-owned competitor to the National Grid and a free-at-the-point-of-use national care service.
For Badenoch and her shadow chancellor Andrew Griffith in Birmingham, the size of the state is the problem. Both welcomed this new ‘battle of ideas’ in their speeches. They will rein in spending and cut taxes – though not for pensioners of course – and set fire to as many regulations as they can. They talk of Burnham’s ‘socialist fever dream’ and of Britain not being far off a ‘command economy’.
I’m still discontented though. Don’t get me wrong, I find it a much more interesting battle line between parties than transgenderism or Winston Churchill. Give me pensions over penises any day. But the fiscal realities that both leaders acknowledged take the teeth out of this debate somewhat.
For its part, Labour’s leadership was clear: We don’t have the money Tony Blair did in the 1990s. The fiscal rules must be adhered to. Those rules and the oversight of the Office for Budget Responsibility (OBR) watchdog put a stop to how divided and interesting this debate can really get.
Ben Nunn, a former special adviser to Rachel Reeves, complained in a Financial Times article this week that no matter how much toil the Chancellor and Treasury team put into preparing political arguments within a Budget, all journalists are interested in is the OBR’s verdict. ‘On the day, there was less focus on what the chancellor said, and more on what the OBR concluded,’ Nunn lamented about previous Budgets. It left him and his colleagues ‘feeling politically impotent’.
That’s both true and a good thing. When we’re spending £110 billion a year on debt interest alone – and having to borrow even more to keep paying it – there is very little room for the politics of public spending. The role of chancellor has devolved into one whose job is solely to keep things within the OBR’s tolerance limits rather than making big political interventions that define the kind of country we want to have. That reality can’t – and won’t – change until someone in power fixes the fundamental problems which I bang on about in this newsletter week after week (higher inflation, energy and employment costs, staggeringly high forecasts for future spending commitments).
Nevertheless, I picked up a growing appetite on the Tory side not for abolishing the OBR but creating some sort of competitor. Some MPs have asked the banking sector to look in to backing a thinktank that might provide more growth-oriented, dynamic models which would factor in behavioural responses to tax and spending changes. This would give both Tory and Labour governments space to push policies that previously the OBR wouldn’t have ‘scored’ kindly or positively enough.
I have some sympathy for that view. But there’s surely a simpler answer: Just let the Treasury do it. The system we have now where an independent forecaster does the maths is preferable to one in which the Chancellor cooks his own books. That said, I don’t see why the Treasury couldn’t publish a sort of dissenting opinion alongside the OBR on Budget Day. I.e: ‘Whilst the OBR does not think this tax cut will lead to an increase in revenue we do because of X, Y and Z.’ If the Chancellor is credible and politically convincing enough, then voters and bond vigilantes alike might accept that particular policy.
At least that way Budget Day would turn back into an argument rather than an abacus exercise.
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