Richard Hughes, the outgoing chair of the Office for Budget Responsibility (OBR), has resigned, prompting scrutiny over his replacement. The Chancellor now faces the task of appointing a credible economist to lead the OBR, a decision expected to impact market perceptions and potentially government borrowing costs.
Hughes’s resignation has been linked to the tension surrounding his refusal to credit the Government for policies deemed “pro-growth,” given that none of these policies materially affected the economy. He adhered to a standard that required a significant economic impact—at least 0.1% of national income—for any policy to be scored.
The recruitment of a new OBR chair comes amid political pressures, with concerns that any perceived interference could undermine the OBR’s independence. This independence is crucial for maintaining market confidence, especially given recent political discourse about the restrictions the OBR places on government budgets.
In recent months, Hughes defended the OBR against claims of operating as a political tool or being overly restrictive. His tenure included navigating various administrations, aiming to provide stable economic oversight amid political fluctuations. During the latest Budget, he noted planned changes, including the frequency with which the Government would respond to OBR forecasts.
Hughes has stated that while the OBR will continue to produce biannual forecasts, the Government will no longer be required to act on these forecasts immediately. This change raises questions about the Government’s responses, especially if there are financial surpluses prior to significant local elections.
Hughes’s leadership highlighted the OBR’s role in how government priorities are set, though he contended that the ultimate decision-making power lies with Chancellors. His departure signifies a transitional moment for the OBR, while the implications of appointing a new chair will be closely observed by both markets and analysts.
Source: https://www.bbc.com/news/articles/cwyvnnz5842o?at_medium=RSS&at_campaign=rss