Labour pledges more watchdog power after Truss mini-budget
Labour has promised to hand increased powers to the UK’s economic watchdog if it wins the next general election.
Liz Truss’s mini-budget, with no Office for Budget Responsibility (OBR) analysis, a year ago, led to market chaos and a fall in the pound’s value.
Under Labour’s plan, the OBR would be free to publish forecasts and analysis alongside any tax and spending changes.
Sir Keir Starmer said the aim was to bring “stability for so many families” hit by “that disaster of a budget”.
“Huge damage was done to our economy and we’re still paying the price. That can never be allowed to happen again. So this is a pragmatic, sensible measure,” the Labour leader added.
Speaking at the London Stock Exchange, he said businesses also wanted “stability… not chopping and changing”.
Shadow chancellor Rachel Reeves told the BBC that, under Labour, all major tax and spending decisions would by law be announced in November, to reduce uncertainty for businesses and families.
Currently the government typically sets out budgets in the spring, followed by an autumn statement which can also contain significant measures.
Under Labour’s plans, only very minor policy changes would be permitted in a spring update to Parliament.
The OBR usually produces forecasts only twice a year, to accompany the spring budget and autumn statement – but also provides monthly commentaries on the economy.
Responding to the Labour announcement, Tory MP Andrew Griffith, the economic secretary to the Treasury, said: “The Conservatives created the OBR to curb Gordon Brown’s reckless spending binge.
“The current Labour Party is on the same, destructive path with their plan to borrow £28bn a year which would fuel inflation and push up interest rates even further.”
Former prime minister Ms Truss also hit back, saying a “25-year economic consensus” had resulted in the highest government spending for half a century, the highest taxes since World War Two, a national debt of more than £2.5tn, and low growth.
“It beggars belief that Labour think Britain’s problems will be solved by bigger government and even more powers for quangos,” she added.
But Conservative former Chancellor George Osborne, who created the OBR, described Labour’s plans as “sensible” and “pragmatic”, adding: “If the Tories are smart they’ll adopt them.
“We created the OBR 13 years ago so chancellors couldn’t any longer fiddle the numbers. A year ago we saw the fiasco when one tried to bypass it.”
The package, which Labour is calling its “fiscal lock”, represents an attempt to seize the mantle of fiscal responsibility – and to remind voters of the mini-budget, whose anniversary falls on Saturday.
Some argue that Ms Truss’s decision not to ask the independent OBR to assess then-Chancellor Kwasi Kwarteng’s measures in advance was a major factor in the economic and political chaos which ensued, bringing about her rapid political demise.
If the government felt it had to rush out new measures without the OBR having time to put together its forecasts – for example in response to a financial crisis or another pandemic – the OBR would be given the power to publish analysis rapidly afterwards, Ms Reeves told the BBC.
The Institute for Government (IfG), a think tank, said Labour’s proposals would “improve how fiscal policy is made”.
Tom Pope, deputy chief economist at the IfG, said: “The proposed measures to strengthen the OBR’s hand are welcome.
“The mini-budget demonstrated the folly of announcing large permanent changes to fiscal policy without an accompanying forecast, and Labour’s changes would ensure this could not happen again.”