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Leaking the Budget is an unhappy tradition, continued this year by the Office for Budget Responsibility. About an hour before Rachel Reeves delivered her speech to the Commons on Wednesday, the government’s independent fiscal watchdog pre-empted the chancellor’s big moment by making available a link to its assessment on its website for all to see.
The precedents range from the time the 2013 Treasury documents found their way to the London Evening Standard before George Osborne got up to speak, to the Daily Mirror getting hold of the 1996 Budget and chancellor Hugh Dalton’s 1947 decision to leak key details to a journalist — it cost him his job.
The OBR immediately held up its hand for this week’s dreadful error and apologised to the chancellor and to parliament. If I was trying to make the case for lenience, I would point out that the world had sight of the OBR documents containing all the UK’s official forecasts and tax changes only about 45 minutes before they were announced. No policy changed. Financial market movements were noticeable but relatively muted. The leak allowed the public and journalists to see the Budget figures and measures without having to listen to political spin. And it is difficult for anyone in this government to criticise an independent body for Budget leaks after the past six weeks. Pots and kettles come to mind.
Unfortunately, that would be a grotesquely generous judgment. The OBR’s error is worse than other Budget leaks because the fiscal watchdog exists solely to improve the process and has failed in its main job. The disaster exposes the OBR to future political questions and undermines the case for independent economic institutions. The OBR’s carelessness therefore has damaged us all.
We have independent economic institutions not because they are inherently beneficial, but because we think they help countries and economies work better. In doing so, we have to accept that we, the public, are handing significant powers to unelected officials and this inevitably comes with a large democratic cost. People cannot boot out the governor of the Bank of England or the chair of the OBR at the ballot box. And as the Budget showed, the fiscal watchdog’s predictions indirectly set our taxes. The minimum we require in return is competence.
If the OBR cannot organise its document handling, how can we trust it to get the judgment on productivity or the tax richness of GDP forecasts right? The officials who sit in a small office above the Ministry of Justice took the view that growth in the years ahead will generate much more revenues than it previously thought. Had they been less generous to the government, the tax rises imposed by Reeves would have had to be much larger to balance the books. That remains a big risk in the forecasts.
The same rules of competence, transparency and accountability apply to all independent economic institutions. The Bank of England hurt its reputation greatly when the governor blamed the public for asking for large pay rises in response to high inflation in 2022 rather than simply saying it would do what was necessary to meet the inflation target. The BoE’s satisfaction scores are still struggling to recover from that period.
Each time economic institutions undermine their own credibility in these ways, it becomes easier for malign politicians to say it is time to take back control and go on to implement genuinely damaging policies without any checks and balances.
Liz Truss already blames the OBR, rather than her own decisions and her own MPs, for her downfall as prime minister. This is now harder to counter. When Nigel Farage, the leader of Reform UK, says he might want to change the Bank of England governor because he felt Andrew Bailey was a “dinosaur” and “ridiculous”, the defence of economic institutions must come both from the law and from a general understanding that they are doing a good job.
Unelected power in economic institutions comes with great responsibility. It requires a genuine desire for accountability to overcome the lack of legitimacy inherent in their operations.
Richard Hughes, chair of the OBR, has instigated an investigation into the publication of the Budget documents ahead of time. This will go to the OBR’s oversight board, a small non-executive committee of two external advisers. They would be wise to treat this task very seriously and refrain from sweeping the matter under a large Treasury carpet.
In spilling the beans ahead of the chancellor’s speech, the fiscal watchdog has dangerously undermined its legitimacy for now and damaged confidence in its other judgments. It is hard to image a worse error at such a bad time.