The Social Market Foundation (SMF) has welcomed today’s announcement by Chancellor George Osborne that he will hand responsibility for producing official fiscal projections to an independent statutory body. These plans are in line with SMF proposals published in December 2009. The new Office for Budgetary Responsibility (OBR) will have significantly more power and independence than when it was originally proposed by the Conservatives, and this evolution of the idea is welcome. But the government should go further to make the new body truly independent and authoritative.
Commenting SMF Director Ian Mulheirn said:
“The Conservatives’ original plan was for the OBR to scrutinise Treasury projections. I welcome the fact that the Chancellor has gone further and handed responsibility for the entire process of fiscal projection making to this new body. We argued that this was a necessary step for people to have confidence that government is not fiddling the figures. But we should still go further – the OBR will be still be staffed by civil servants within the Treasury who work for their ministers. What we need is an entirely independent body – just like the Office for National Statistics.”
Notes for editors
- Forecasting Independence: Taking the politics out of fiscal projections by Ian Mulheirn and James Lloyd was published by the Social Market Foundation in December 2009 and is available here.
- In its 2008 paper, Reconstruction: Plan for a Strong Economy, the Conservative Party said that, if elected, they would create a statutory Office for Budget Responsibility charged with providing independent scrutiny of fiscal projections from HM Treasury, to ensure that fiscal projections were realistic and not politically-influenced.However, today’s announcement sees Chancellor George Osbourne go much further, handing over complete control of forecasts used in fiscal policymaking. HM Treasury has announced that instead of providing scrutiny, the Office for Budget Responsibility will produce “the official fiscal and economic forecasts on which budget decisions are made.”
HM Treasury has said that the Office for Budget Responsibility, which will be headed by Sir Alan Budd, will be put on a statutory footing in the near future, and the Treasury will set out more detail on the terms of reference for the OBR’s independent assessment of the public finances and how it will assess the sustainability of the public sector balance sheet.
In Forecasting Independence, the SMF proposed creation of an independent Office for Fiscal Analysis (OFA), separated from fiscal decision-makers in government, that would undertake all official fiscal Statistics Authority, would ensure that it was entirely free from the risk or perception of organisational bias. Its modelling assumptions and inputs would, as far as possible, be open to public scrutiny and its outputs would be freely available to external bodies, in particular, the opposition parties. These reforms would increase the accountability of government both from the perspective of the markets and the electorate, thus lowering the cost of borrowing and ensuring the pursuit of sustainable fiscal policy in the medium-term.