Richard Hughes has resigned as chair of the Office for Budget Responsibility (OBR). This resignation has the potential to create enormous difficulties for the future of UK economic forecasting. His resignation reportedly was due to the premature release of Budget information, which he blamed on a junior staff member’s error. Hughes’s departure raises questions about the continuity and credibility of the OBR, which plays a crucial role in shaping the UK’s economic landscape.
The OBR encountered its own strange episode when it released sensitive Budget information in advance. In response, Hughes released last Friday a Reconciliation Table to clarify how the original forecasts morphed. Industry observers viewed this move as a way to address any confusion that may result from the early disclosure. Even with this unfortunate drawback, the OBR will continue to carry out two robust economic and fiscal forecasts annually. These multi-region forecasts will project economic, demographic, and behavioral data five years into the future.
In his five-year tenure, Hughes had to work across those five chancellors to create an environment of long-term stability in the UK economy. His intention for relationship with these chancellors was to allow ample opportunity for candid discussion paired with strong fiscal stewardship. Hughes asserted that the powers vested in the OBR were defined by Parliament, emphasizing that chancellors retain authority over their own targets and policies.
“The powers given to us are those given to us by Parliament in an Act of Parliament, and that’s to produce a forecast. Chancellors set their own targets. They set their own policies. Chancellors are in charge of £1.5 trillion worth of revenue and £1.5 trillion worth of spending,” – Richard Hughes
In context of his resignation, the Chancellor will have to grapple with finding someone appropriate to fill Hughes’ shoes. From a political perspective, all Rachel Reeves needs is a strong and credible economist. It’s this kind of expert that will help steer the OBR through these stormy waters.
Hughes did not relent, insisting on strong arguments that the 35-member forecasting group did not have too much power. He thunderously asserted its indispensable place in the economic forecasting process. As he said, none of the events we are considering came close to 0.1% of national income. This new threshold would represent a more pronounced national impact that warrants deeper review.
“If they don’t want to meet their targets, they can change them, which we’ve seen chancellors do in the past as well,” – Richard Hughes
Perhaps Hughes’s unwillingness to give the government due credit for anything other than “pro-growth” policies is what sent economists and policymakers reeling. His focus on creating baseline forecasts and evaluating government plans highlights the OBR’s dedication to independence and accuracy.
“All we do is produce a baseline forecast, cost government policies when they give them to us, and we give them an assessment about whether we’re up there, in line and on track to meet those targets,” – Richard Hughes
In short the OBR is committed to its mission. It will compile at least £1.5 trillion in yearly revenue and spending projections. The integrity and accuracy of its forecasts are key to the influence its grown over time on government policies. These forecasts are a guarantee to UK economic stability.