Labour’s revised charter for the OBR should improve the quality and predictability of fiscal policy as well as its credibility 

It is rare that chancellors will want to disregard the OBR’s advice, with the events of last autumn only making this less likely, but Reeves’s OBR announcement is welcome. 

The shadow chancellor has confirmed that Labour would implement an update to the Charter of Budget Responsibility to guarantee that the OBR can independently publish a forecast of the impact of any major fiscal event that makes permanent tax and spending changes. But while this will help to improve the credibility of the UK’s fiscal policy, it is not enough to lead to a different approach to fiscal policy making.  

More significant for the quality of fiscal policy making in normal times is Reeves’s commitment to stick to a fixed timetable for budgets that would see major fiscal decisions announced by the end of November each year, with only minor policy announcements made at a spring update. This is in line with recommendations previously made in a report jointly written by the IfG, IFS and the Chartered Institute of Taxation (CIOT), and in the International Monetary Fund’s evaluation of the UK’s fiscal transparency. Fewer fiscal events would mean greater certainty and stability, release civil service resources to focus on better consultation, and produce higher quality legislation.  

Past governments have said that they would do this. The most recent example is the new tax policy making timetable announced by Philip Hammond in 2017, which is still official government policy despite no chancellor since sticking to the schedule. New Labour also planned to have a single budget interspersed with ‘pre budget reports’, but this was also disregarded 

Reeves’s challenge is to stick to her commitment. While she has promised only “minor policy changes at the spring update”, it is all too easy at these events for chancellors to turn ‘fiscal headroom’ into policy announcements that might generate them some favourable coverage or, in the event that forecast updates might mean that fiscal targets are missed (by a small margin), to announce hastily planned spending cuts in order to avoid narratives around fiscal black holes. Ideally it would be the norm for there to be no new announcements at the spring update, perhaps except changes to policy already announced at budget, reflecting feedback from consultation.  

A government committed to improving fiscal policy making could go further 

There is more that Labour could do to enhance the quality of fiscal policy making and improve public understanding of its economic approach, should it win the next general election 

Governments announce large numbers of tax changes which collectively have no clear sense of overall direction. Moving to one major fiscal event should mean that there are fewer changes, and more thought-out changes, but we have long argued that chancellors should publish comprehensive tax strategies to provide a clear signal to the public, businesses and investors about how the tax system is likely to evolve. This would roll the pitch for necessary reforms and discourage ad hoc changes that go against the grain of the government’s broader plans for the system.  

The OBR fulfils an important role in setting out the economic and fiscal reality that chancellors face, but in doing so it can cause ministerial headaches and, as we have seen, a temptation to sideline the institution. So it is reassuring that Labour has committed to prevent that from happening. It signals that it is serious about improving fiscal policy making, and these first steps are ones the IfG has long called for. There is, however, more that could be done.