Has Britain’s Budget Watchdog Become Too All-Powerful?

For decades, the iconic image of Budget Day has been the chancellor standing outside Number 11 Downing Street, proudly holding up the Red Box containing the government’s tax and spending plans. But in modern Britain, as much attention is directed not at the chancellor’s red book, but at a different document entirely: the thick stack of charts, forecasts and fiscal judgements produced after every Budget by the Office for Budget Responsibility (OBR).

The OBR, an independent fiscal watchdog staffed largely by high-achieving economists, civil servants and policy analysts, has come to occupy an unexpectedly influential position in Britain’s economic policymaking system. Some argue that its influence has grown so vast that it rivals — or even constrains — the chancellor herself.

And ahead of Wednesday’s Budget, the debate has sharpened: has the OBR become too powerful, too independent, and too integral to government policy? Or is it merely performing the job Parliament assigned it — providing transparency, credibility and discipline to British fiscal policy after years of instability?

A Watchdog Few Know — With Power Few Understand

The OBR resides in the Ministry of Justice building, far from the Treasury’s polished corridors. It is little known outside Westminster’s fiscal circles, but its reach is immense. Its twice-yearly forecasts, issued alongside the Budget and Spring Statement, can determine how much a government may spend, how much tax it may cut, and whether its policies comply with self-imposed fiscal rules.

This Wednesday, those calculations will again shape Chancellor Rachel Reeves’s decisions — and the political narrative that accompanies them.

Yet the body’s immense role has stirred unease across the political spectrum. Critics say the OBR, unelected and insulated from frontline politics, increasingly dictates “the limits of government ambition”. Former Labour minister Lou Haigh has called it “an unelected institution dictating limits”, while the Trades Union Congress recently described it as “a straitjacket on growth”.

These comments reflect a growing anxiety: is the OBR really calling the shots?

Reeves Strengthened the OBR — Then Grew Frustrated With It

Ironically, the surge in criticism comes after Labour itself expanded the OBR’s powers.

When Labour entered office in 2024, Reeves introduced legislation that significantly increased the watchdog’s independence. The inspiration was rooted in the disasters of the 2022 mini-Budget. Then-Chancellor Kwasi Kwarteng had dismissed an OBR forecast that would have forced him to explain how unfunded tax cuts would be paid for — a refusal that spooked financial markets, triggered a collapse in gilts, and forced emergency Bank of England intervention.

Reeves’s new law ensures that this cannot happen again. The OBR can now:

Publish forecasts even when government does not request them
 

Challenge department-level spending assumptions
 

Access Treasury data directly without ministerial mediation
 

Reeves intended this to rebuild market trust. Yet the increased independence has given the OBR latitude to issue stinging assessments about the government’s handling of tax and spending. In July, the watchdog warned that “promises made are constantly not kept” — prompting an icy response from the chancellor:

“Their job is to produce forecasts, not to give a running commentary on government policy.”

Still, OBR chair Richard Hughes has maintained that concerns about excessive influence are overblown.

“The only powers we have are those Parliament gave us,” he said in March. “We forecast. We scrutinise. The chancellor chooses the policies.”

This tug-of-war — government frustration on one side, watchdog impartiality on the other — has become one of the defining tensions of fiscal politics in 2025.

The OBR’s Influence: Powerful or Overstated?

On paper, the OBR has no authority to set policy. But its forecasts can dramatically reshape the fiscal landscape. A prime example emerged in October, when the OBR reportedly downgraded its productivity forecast by 0.3 percentage points — a small but significant adjustment.

According to the Institute for Fiscal Studies, every 0.1 percentage point drop in productivity adds £7bn to government borrowing in the medium term. A 0.3 point downgrade therefore worsened the outlook by £21bn, reducing Reeves’s “headroom” to meet her own fiscal rules and limiting scope for tax cuts or spending increases.

Productivity forecasts are inherently uncertain and can swing with global economic conditions. Yet because the OBR embeds them into long-term fiscal projections, they directly affect the chancellor’s room for manoeuvre.

Had the downgrade occurred when Jeremy Hunt was chancellor, he may have had to abandon the pre-election National Insurance cuts of early 2024.

This raises a controversial question: should unelected technocrats wield this much influence over political choices?

Warnings About a “Fiscal Technocracy”

Paul Johnson, former director of the Institute for Fiscal Studies, has long cautioned against Britain drifting into “over-technocratisation” of fiscal policy.

“Choices over tax, spend and borrowing are not narrow technical questions. They are inescapably political.”

The OBR’s defenders argue the opposite: without an independent arbiter scrutinising numbers, governments are free to make unrealistic promises. They point to the Truss administration’s collapse as proof of the consequences.

But critics believe the OBR has evolved beyond an impartial referee into an institution shaping — perhaps limiting — the policy agenda.

Left-wing economists argue it embeds austerity by default, while some on the right now complain that the OBR undervalues “pro-growth measures” such as planning reform or post-Brexit trade improvements. In other words, rival factions accuse the OBR of opposite sins — evidence, some say, of its neutrality, and others say, of its excess power.

The Origins of the Watchdog

The OBR was born not in crisis, but in a 2008 pamphlet published during the global financial meltdown. Its architect was then-opposition leader David Cameron’s team, which aimed to restore trust in public finances by creating an independent fiscal watchdog.

In 2010, the coalition government launched the OBR; by 2011 it had statutory authority.

George Osborne predicted problems would arise — and they did. OBR chair Robert Chote famously produced a chart showing public spending falling to its lowest levels since the 1930s, prompting comparisons to George Orwell’s The Road to Wigan Pier.

Since then, successive governments have clashed with the watchdog:

Liz Truss accused it of being part of a “deep state” that torpedoed her government
 

Boris Johnson’s administration bristled when it showed tax burdens at post-war highs
 

Rishi Sunak’s Treasury often negotiated fiercely with OBR officials over headroom estimates
 

Now, under Labour, the circle has come full turn: the party that boosted the OBR’s independence finds itself constrained by the institution it empowered.

The Technocrats at the Helm

Part of the OBR’s authority lies in the credentials of its leadership. The Budget Responsibility Committee includes:

Richard Hughes, former Treasury chief of fiscal policy, with Oxford and Harvard pedigree
 

Tom Josephs, another former senior Treasury official
 

Professor David Miles, former member of the Bank of England’s Monetary Policy Committee and ex-Morgan Stanley chief economist
 

Their experience commands credibility in markets — and scrutiny in politics.

Some Labour MPs argue that the OBR’s top ranks, dominated by former Treasury officials, inherently reflect a cautious orthodoxy. Others praise the institutional gravitas they bring to Britain’s fiscal system.

Ending the “Tax Speculation Hamster Wheel”

Insiders say that from this Budget onward, a major procedural change will reshape the OBR-Treasury dynamic: the watchdog will produce its key “headroom” judgement once per year, instead of twice.

This is an attempt to reduce months-long bouts of speculation about tax rises—rumours that often unsettle markets and burden the Treasury with premature political narratives.

According to the IMF, raising headroom is one of the best ways to avoid destabilising spirals of tax speculation.

But critics insist the problem is not the frequency of OBR reports — it’s the perceived dominance of the OBR itself.

If Not the OBR, Then Who?

Ultimately, the question is not only whether the OBR is too powerful, but also what should replace its role if its powers were rolled back.

Even without the OBR, governments would remain subject to:

market discipline
 

credit rating agencies
 

gilt investors
 

international institutions such as the IMF
 

As the Bank of England governor Andrew Bailey stressed during the 2022 crisis, the markets “respect and rely on” OBR forecasts. Removing or weakening the watchdog would not free ministers from scrutiny — it would merely shift that scrutiny elsewhere, potentially to actors with less transparency and even less democratic oversight.

Britain remains heavily reliant on global investors — the “kindness of strangers” who buy UK debt. And those strangers increasingly include hedge funds rather than domestic institutions.

In that context, independent credibility is not optional.

A Debate Far From Settled

The OBR sits at the intersection of economics, politics and public accountability. Its critics say it has become a super-civil-service: too cautious, too influential, and too foundational to the national consensus on fiscal restraint.

Its supporters say it prevents chaos, disciplines government, and protects Britain from ideological policymaking unmoored from economic reality.

Both sides agree on one thing: the OBR is now central to how Britain runs its economy.

And as Wednesday’s Budget approaches, the watchdog’s power, role and future are all — perhaps for the first time — firmly on the political agenda.

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