The Office for Budget Responsibility stands at a critical juncture. As governments increasingly focus on transformative structural reforms, the OBR's traditional tools—designed for analyzing incremental policy changes—are showing their limitations.
The 2022 mini-budget crisis starkly illustrated these challenges. When the government bypassed the OBR's scrutiny of its £45 billion tax cut package, market confidence collapsed, sending the pound plummeting to $1.03. Only the restoration of independent assessment helped stabilize the situation.
This episode revealed a deeper problem: the OBR's forecasting framework, while excellent for evaluating modest policy adjustments, struggles to assess bold reforms that could reshape Britain's economic landscape. This creates a dangerous feedback loop where policymakers, aware of these limitations, might shy away from transformative policies in favor of incremental changes.
We propose modernizing the OBR through stronger academic partnerships, cutting-edge research capabilities, and reinforced institutional independence. With an annual investment of £2.9 million, these changes would equip the OBR to evaluate ambitious reforms while maintaining its crucial role in fiscal oversight.