Union calls for robust review of OBR over fears it holds back economic growth

The TUC is pressing Chancellor John Healey to conduct a comprehensive review of the Office for Budget Responsibility (OBR), citing concerns that the forecaster's analysis hampers economic growth. Andy Burnham has pledged "good growth in every postcode" for the upcoming budget on October 28th, prompting the union to urge Healey to utilize this budget to reassess OBR assessments.

The TUC contends that the OBR often undervalues the advantages of public investment by assuming it "crowds out" private capital, a viewpoint disputed by certain economists. Paul Nowak, TUC General Secretary, stated, "For far too long, the OBR has been a hindrance to widespread progress across the country. The world has transcended the detrimental logic of austerity, yet the OBR models still incorporate its flawed premises.

Only a thorough review can align the OBR with contemporary economic standards." This sentiment aligns with the calls for restructuring the independent forecaster from various think tanks and advocacy groups, including Progress, a moderate faction within Labour, and the New Economics Foundation (NEF), a left-leaning organization.

Louisa Dollimore of the Good Growth Foundation criticized the OBR as "a backseat driver with outdated maps" that "obstructs long-term planning and investment" at a time when Britain requires substantial planning and investment. Healey's incoming chair, economics professor Jonathan Haskel, recently acknowledged a more pessimistic outlook than some of his peers, foreseeing higher interest rates and weaker GDP growth in the medium term.

Haskel also noted Britain's insufficient fiscal position. The TUC further calls for bolstering investment entities like the National Wealth Fund (NWF), leveraging the fiscal rules' inherent flexibility. Reeves revised the rules to exempt government borrowing from Treasury targets if matched by a comparable financial asset, enabling greater government-backed investments including the NWF and the National Housing Bank.

The TUC urges the government to expand the NWF's mandate, permitting it to pursue investments that may require up to 15 years to yield returns, thereby expanding the range of viable projects. Some economists have expressed apprehensions regarding the possible implications for the bond market resulting from heightened borrowing. Oxford Economics cautioned that the UK's fiscal condition is precarious and there is a growing skepticism about the new Prime Minister's dedication to fiscal sustainability.

The Treasury spokesperson emphasized the importance of fiscal discipline as the foundation of economic stability and national security, underlining that the government will adhere to the fiscal rules while retaining a cushion against uncertainty, including reductions in debt.