This briefing investigates who the Office for Budget Responsibility are and what they do. It also considers the government's fiscal targets, which are included in the Charter for Budget Responsibility.Jump to full report >>
The Office for Budget Responsibility (OBR) was established within days of the Coalition Government coming to power in May 2010 with the aim of improving the credibility of fiscal policy.
The body was initially established on an interim basis with Sir Alan Budd as chair. Robert Chote, a former director of the Institute for Fiscal Studies, has been chair of the OBR since October 2010. The Treasury Committee has the power of veto over this appointment. The Budget Responsibility and National Audit Act 2011 provides for the establishment of the OBR, and sets out its functions and broad governance structure.
The OBR’s responsibilities
The OBR’s role, as laid out in the Charter for Budget Responsibility (the Charter), is to produce forecasts for the economy and the public finances. These are produced independently of the government. In the past, the Treasury’s forecasts have been based on the Chancellor’s judgement. This has led to the suspicion that forecasts may be over-optimistic. It is hoped that any perception that the forecasts could be politically motivated is removed by an independent body producing them.
The OBR also comments on whether the government’s policies have a better than 50:50 chance of meeting the Chancellor’s fiscal targets which are set out in the Charter. It also examines the long term sustainability of the public finances, spending on welfare and devolved taxes. In autumn 2015 the OBR took on a new role: producing a biennial fiscal risk statement.
The government’s fiscal targets
The government’s fiscal target, or mandate, is to deliver a surplus on the public sector’s overall budget, known as public sector net borrowing, by 2019/20. This is an interim target: once a headline surplus has been achieved the fiscal mandate requires a surplus on the budget in all years.
The government also has a supplementary debt target, for public sector debt to be falling as a % of GDP in each year to 2019/20.
Reviews of the OBR
Both an external review and a Treasury review have reported positively on the OBR. Both praised the OBR’s credibility and reputation, and the integrity brought to the fiscal forecasts. Both reviews made recommendations for the future of the OBR, including the need to undertake succession planning for key and long-serving members of staff. The Treasury review recommended the changes currently being made to the OBR’s role.