An inquiry into the role of the UK government’s economic forecaster is being launched by a group of MPs, after the body came under intense scrutiny in the run-up to the Budget.
The Treasury Committee will examine the Office for Budget Responsibility’s (OBR) first 15 years and consider potential reforms, including any improvements or changes to its remit.
The inquiry comes after questions over the OBR’s influence were raised ahead of the Budget and after its head, Richard Hughes, resigned following an error which saw its key economic forecast published an hour before Rachel Reeves delivered her speech.
But committee chair Dame Meg Hillier said the inquiry “is not a stick to beat the OBR with”.
The OBR’s role is to produce forecasts, examine the cost of government policies and see whether the chancellor is on track to meet her self-imposed rules on managing the economy.
But in the lead up to the Budget, some experts questioned whether the institution was too powerful and had too much influence over government tax and spending decisions.
The OBR was in the spotlight before the Budget when it lowered its forecast for productivity, which Chancellor Rachel Reeves argued would make it harder to meet her spending rules.
However, it later emerged the productivity downgrade alone was offset by higher tax receipts and the economic picture was better than widely thought, prompting claims that Reeves had misled the public over the state of public finances, which the chancellor has denied.
A senior figure of the OBR, Professor David Miles, told the Treasury committee last week he believed the chancellor’s comments were “not inconsistent” with the situation she faced.
Prof Miles said the watchdog was not “at war” with the Treasury and added the OBR raised concerns with Treasury officials about leaks to the media.
Reeves admitted to MPs this week there were too many unauthorised leaks ahead of the Budget.
Dame Meg said the OBR had an important role, but it was often criticised by “frustrated economists who feel they should be in charge because they shout the loudest”.
“And we need only remember Liz Truss’ mini-Budget to remind ourselves of what happens when the OBR is sidelined,” she added.
“What my Committee intends to do is have an honest conversation about what the watchdog does well and where it needs to do better.”
The inquiry also comes after the OBR published a key document early on Budget day, effectively confirming a number of new measures before they were announced by Reeves.
That error led to the resignation of OBR chair Mr Hughes just days later.
The OBR was created in 2010 to provide independent analysis of the government’s finances, and on Budget day it publishes its report on the health of the British economy alongside the chancellor’s statement.
The Treasury Committee will look at how well the OBR has communicated its forecasts and analysis, and how that has improved over time, whether it has improved Treasury’s forecasting processes, and whether it has performed its role with impartiality and transparency.
MPs will also consider what changes could be needed to improve the organisation and its communications, resources, and broader role and remit.
Dame Meg said she hoped the inquiry would be useful for the new chair when they are appointed.
