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Britain’s fiscal events are a spectacle. On Wednesday, the Office for Budget Responsibility, the government’s fiscal watchdog, unveiled a rosier picture of the public finances. Chancellor Jeremy Hunt saw an opportunity to cut taxes and seized it. Conservative MPs brayed. Business groups purred. And every press officer in the land jammed my inbox with hot takes.
Twice a year the chancellor delivers a pundit’s dream: a flashy economic announcement, with a ready-made scoring system published by the OBR. Politicos gave Hunt top marks for pleasing the Tory base, while leaving the opposition little room for manoeuvre. Economists were more critical, pointing out that his new policies left remarkably little headroom relative to his fiscal rules. I’ll admit to enjoying the circus. But if I were running the show, I would do things differently.
I would start by reminding everyone that Britain is weird. America’s Democrats dream of a world in which Janet Yellen could stand up twice a year and unveil policies that would whip through Congress. In Germany, new tax policies are announced and then debated in a legislative process that takes months. Jón Blöndal of the OECD explains that in other countries, parliament is more active in scrutinising budgets, so bodies like the OBR are less prominent.
I would go on to reassure everyone that my imaginary benevolent dictatorship is only temporary, so I don’t have time to chip away at the Treasury’s power. My quicker fix is to change the way we score decisions.
The chancellor should get a penalty for every made-up number baked into the OBR’s forecast. Perhaps a handful of glitter thrown at him for each one. The latest set of figures assumes that spending on public services will fall in real terms over the next two years, and stay below its 2022-23 level for the next five. If you believe that will happen, I have an NHS hospital to sell you. It also assumes that Hunt will increase the rate of fuel duty next March. That is a feat no chancellor has managed in more than a decade.
Hunt should also be rewarded for simplicity, to offset the overwhelming urge to fiddle. On Wednesday, he quite reasonably unveiled a tax break for business investment. Less admirably, it represents the fourth major corporation tax reform in three years. Perhaps the simplicity score could be the inverse of the number of measures announced. (The OBR counted 76.) Or perhaps there could be an arbitrary limit of, say, 30 changes per year. A budget Budget, if you will.
If I were in charge, uncertainty would feature much more prominently in the post-match analysis. Imagine a system whereby an official sitting behind the chancellor operated a traffic light during his speech, depending on how sure the OBR was of a policy’s effects. (The business investment tax change would get a red light.) Or something similar if the chancellor had only a slim chance of meeting his fiscal rules. Even with the made-up numbers, the OBR thinks there is only a 56 per cent chance that public sector net debt will fall in 2028-29. Another red light could flash every time the chancellor treats the OBR’s central forecast as gospel.
Call me a fun sponge, but I do think the policymaking process might improve if there were less secrecy involved. In October, a briefing paper from the OBR bemoaned that the Treasury stopped them discussing a new childcare policy with two other government departments before it was announced. “We routinely ask, but cannot insist, that the Treasury shares such information with affected departments,” it said. In other countries this sort of communication is common. What about crediting the chancellor with a newly minted Treasury crypto coin for each department he involved?
A final innovation would broaden the assessment of Treasury showpieces beyond the standard metric of fiscal responsibility. The Treasury does estimate the effects of policy changes on the rich and poor. The OBR also assesses how much they will bump up growth. (It cautiously judged that Hunt’s “Autumn Statement for Growth” would lift the level of gross domestic product by a whopping 0.3 per cent in five years.)
What about other objectives, like making progress towards net zero targets, reducing poverty, cutting other sorts of inequality, or delivering value for money? (The National Audit Office looks at the last of those, but on its own timeline.) I would create an Office for Missed Budget Opportunity, whose chief would propose good ideas and yell them through a loudspeaker while the chancellor does his press round.
You might accuse me of not taking the job of improving Britain’s fiscal events entirely seriously. Perhaps. But given the theatrics we go through twice a year, arguably I didn’t start it.
soumaya.keynes@ft.com
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