Britain’s colossal national debt, and the interest we pay on it – over £100 billion a year – is arguably now the most important issue in British politics. But while some on the Left and the Right point the finger of blame at the Office for Budget Responsibility (OBR), and are calling for its abolition, this is unfair and counterproductive. If anything, we should be emulating responsible countries like the Netherlands, and empowering our fiscal watchdog further.
Britain desperately needs fiscal credibility. Our now regrettable debt structure, so dependent on inflation-indexed bonds, has seen our debt interest payments balloon: having been around £39bn in 2019, they are now forecast to reach £132bn by 2030.
This week, 30-year gilt yields, which move inversely to the price of UK government bonds, approached their highest level in 27 years. The sense of urgency over the scale of our debt crisis has also been heightened by a recent National Institute of Economic and Social Research (NIESR) report, which showed the Chancellor needs to find more than £50 billion in savings or extra taxes in the Budget this autumn. The OBR is generally expected to produce similar numbers for Rachel Reeves’ consumption in the coming months.
However, even as the need for fiscal credibility rises, a consensus seems to be emerging that the OBR can’t be trusted. Reform’s former chair and now party spokesman Zia Yusuf described the OBR as ‘useless fake experts’, and leftist Novara Media co-founder Aaron Bastani said, ‘We need to abolish the OBR’. More establishment figures are also increasingly acknowledging flaws in the way the OBR does things, with a recent New Statesman piece written by Labour MP Andy MacNae titled ‘The OBR is always wrong’.
The OBR has come under additional scrutiny following its latest Fiscal Risks and Sustainability (FRS) report, which reviewed its initial forecast on the triple-lock policy (implemented in 2012), and found the cost (now set to be £15.5 billion annually by 2029-30) to be three times higher than it originally projected.
This flaw, though, which causes its forecasts to appear so often wrong, isn’t to do with problems with the OBR’s modelling per se. Instead, it’s the way we interpret the forecasts it makes. The OBR has itself said ‘single-point economic forecasts of an uncertain future are almost certain to be wrong’. Simply put, innumerate politicians and policymakers have tended to give their output too much authority down to spurious levels of precision. The OBR intends to move to a range forecast in 2027, which should make this point more apparent to users of its output, and hence restore some credibility.
However, this doesn’t address the wider picture: successive governments’ crippling addiction to borrowing to fund current spending, to the point where annual debt interest is twice the defence budget and growing. Here, there is a case to be made for turning to the example of the Dutch.
The Netherlands’ equivalent of the OBR is the Centraal Planbureau (CPB). Unlike the OBR, the CPB advises any political party that asks it. There have long been proposals for the OBR to follow suit. The first OBR chairman, Sir Robert Chote, believed that it would be ’good for politics’ if the OBR was able to give credibility to the opposition, not just the government of the day. In 2013, Ed Balls – then shadow chancellor – wrote to the OBR asking it to examine the feasibility of Labour’s proposed spending plans (the Coalition government did not approve his request). At the time, in a select committee hearing of the Treasury Committee, then Chair Andrew Tyrie also supported the OBR costing party policies in the run-up to an election.
Today there is even more reason to follow the CPB’s approach, as it would allow new insurgent parties, such as Reform UK, to have their economic promises publicly tested. This would offer them the opportunity to prove their sums really add up – and incentivise them to put forward a credible, carefully-costed agenda.
This change would not only be beneficial to new parties. Before the last general election, it’s likely that, had the OBR costed Labour’s manifesto, Rachel Reeves would have been keen to show voters how fiscally sound her plans were. Given the current state of the economy, it couldn’t have been a bad thing if the OBR had assessed costs in Labour’s manifesto, and forced them to be more honest about their tax plans and the costs of measures like the Employment Rights’ Bill.
While the role of the CPB is almost certainly not the only factor at play, the political culture in the Netherlands does seem to be more fiscally responsible, despite its fractious multi-party system. The Dutch had a debt-to-GDP ratio of 43.7% in 2024, a turnaround from 67.2% in 2014. The CPB is widely credited with being key to fostering the Dutch political consensus on fiscal discipline. For comparison, British debt to GDP has increased over the same period from 81.6% to 95.9% of GDP last year.
Government spending during the Covid pandemic was considerable, estimated at £358bn by the Treasury. In contrast, the Dutch spent around €88bn, a considerably smaller sum even when adjusted on per capita terms for a smaller population. Perhaps it is no coincidence that while being more prudent through crises, the Dutch are now considerably wealthier than we are. GDP per capita adjusted for purchasing power parity in the Netherlands was $84,200 last year; in comparison, UK GDP per capita was $60,620.
In any case, spending within our means is something our politicians need to better understand. With the OBR being available to cost and advise all parties, we could at least hope that a lesson in fiscal discipline would be learnt.
Given how fractured Westminster has become, with five or six political parties that could potentially contest a significant number of seats at the next general election, all sides need to be held to a higher standard. And not just at elections. What if a more fiscally serious party could, when the Autumn Budget is announced, submit alternative spending plans that have been costed by the OBR?
A political environment like this, where politicians seek to prove they have greater fiscal credibility than others, would surely lead to politicians being far more prudent – something we urgently need. Without a change in approach, we are quickly heading toward a fiscal crisis.
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