Is the Office for Budget Responsibility really protecting the UK economy, or enforcing austerity? I argue that the OBR was designed to remove democratic control over fiscal policy, block investment, and prioritise City interests over public wellbeing. In that case, it's time to get rid of it and put economic democracy back at the heart of government.
This is the audio version:
This is the transcript:
Do we need an Office for Budget Responsibility? I ask the question for a very simple reason.
We ran the UK economy for centuries without an OBR or Office for Budget Responsibility. We survived World Wars; we created the NHS, the welfare state was delivered and all without an Office for Budget Responsibility.
So why did we suddenly need one in 2010 when George Osborne, an incoming Tory chancellor at that time, created it?
I want to ask whether the OBR is a guardian of fiscal responsibility, or is in fact a weapon for enforcing austerity, because that, I think, is the function of the Office for Budget Responsibility today.
Let's just go back into history a little bit. In 1997, Gordon Brown made the Bank of England independent. He did so to try to indicate that he was economically competent by trusting an independent authority to run a whole part of government for him, separating monetary policy from democratic control as a consequence, and degrading our power over the economy and its control as a result.
Then, in 2010, when the Labour government that lasted from 1997 to that year fell from office, George Osborne went further. He created the Office for Budget Responsibility, a supposedly independent fiscal watchdog, and what actually happened? He removed fiscal responsibility from democratic control as well.
In other words, we ended up with a situation where he removed both monetary policy and fiscal policy, the only two real tools we have to control the economy, from the democratic control of any Chancellor of the Exchequer. No wonder we are in a mess.
The fact is that the Office for Budget Responsibility's real purpose is not neutral. It supposedly exists to check the government's forecasts, but that's not the truth. It actually exists to enforce the fiscal rules that have been put in place by successive chancellors: fiscal rules that say they must always balance their budgets, they must always borrow from the City of London, and they must, as a result, deliver whatever the City of London wants, which is always a smaller state, and therefore austerity, imposing harsh and penal economic management upon the people of this country - who need and deserve better - and who could, what is more, have better.
These rules that are enforced by the Office for Budget Responsibility presume that the government is like a household, but it isn't.
They presume that the funds available to government are limited to whatever the private sector will provide to it, but that's not true because all of government spending is paid for by the government using its power to direct the Bank of England to make payment on its behalf.
And these rules assume that government debt must always be reduced, which does, as a consequence, mean that we would always have a reducing money supply, which in a growing economy, would mean that we would end up with recession.
All of these assumptions are then completely untrue for a sovereign currency-issuing state. And the result?: permanent austerity, by design. That's what the Office for Budget Responsibility was created to deliver.
And in the process, what the Office for Budget Responsibility ignores are a whole range of issues. They focus only on money and never on outcomes. They don't care about full employment or the NHS and its capacity to meet the needs of people. They aren't worried about housing and infrastructure. They don't care about the climate transition, or social well-being and inequality. All they care about is whether the books balance. It's the smallest-minded approach to management that anybody in the world could come up with, and that is what they ensure is the culture of government.
They make a whole range of mistakes as a result.
The Office for Budget Responsibility presumes that the UK government can run out of money when it can't because it creates the money in the first place.
They assume the government can only spend if it borrows or taxes first, and that's not true because the spending always comes first, because the Bank of England creates the money to make the payment.
They therefore presume that financial illiteracy exists because people won't notice that the basis of their work is quite literally financially illiterate within itself.
They don't recognise that the real constraint within the economy is not money, but is resources.
The real question they should be asking is not whether the books balance, but whether all the labour available in the economy is put to use to best effect, whether all the skills that we require are available, whether the materials that are available are used appropriately, and whether that is done within planetary limits.
The consequence is that the Office for Budget Responsibility sees only numbers and debt ratios.
So it blocks investment, ensuring that productivity remains weak.
It ensures that services collapse by enforcing, outsourcing and privatisation, and as a consequence, it guarantees that people suffer.
But then that is what austerity is all about, and they create a doom loop engineered as responsibility, which is in fact the exact opposite of that.
What would a real budget responsibility system do?
It would ask, are we investing in a future worth living in?
Are we fully using the skills of our people?
Are we caring properly for the sick, the elderly, the young, and everybody else in between who needs help and care?
Are we decarbonising fast enough to survive?
And are we reducing inequality and insecurity so that we improve the overall well-being of everybody in this country?
That is what real fiscal responsibility would look like.
Well, we haven't got it. But we did survive perfectly well without the Office for Budget Responsibility, and it was created to depoliticise economic decisions by pretending that they had to be taken to embed austerity and not the real responsibility I just talked about.
As a consequence, the Office for Budget Responsibility exists to ignore real-world needs and real-world limits, and instead to impose the will of anti-social neoliberal politicians who want to shrink the size of government.
My point is, we need democratic decision making again over how our resources are used, and that is not possible if we have an Office for Budget Responsibility set up in the way that this one is, which is designed to absolutely, and to its absolute core, take away that power to make democratic decisions by telling Chancellors they cannot do what is needed.
As a consequence, the conclusion is obvious. The Office for Budget Responsibility should go, and it should go now, and economic democracy should be put in its place.
That's what I think. What do you think? There's a poll down below. Let us know.
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Now is the time for the 95% non elite of the UK population to take back control of our economic and social destiny.
The UK political elite to put it mildly is shite. The US expression “grifters” is very apt.
Office for Future Generations anybody?
Thanks to “Team Murphy” for drawing attention to yet another facet of the “Single Transferable Party” policy and practices to subvert real, decent democracy.
The Consevative head of this crypto-fascist hydra created spurious obstacles to remove the democratic right to vote from people who were not likely to vote for them.
The Labour hydra head is working to drastically reduce the use of juries, which are the foundation of democracy, because they give real democratic power to regular citizens.
To have governments, oppositions and a main stream media which exclude themselves from genuine “power with responsibility” and so validity, by facilitating the increase of “Facade/Theatre Democracy” and the continuing reduction of deep democracy, which genuinely serves its citizenry, and its children, is a deadly dangerous continuing development.
P.S. Please note that despite the ever increasing proportion of chronically underfed/semi-starving children there is no “Office for Hunger Responsiblity”.
P. P. S. Ditto Infrastuctures, homelessness, erc., etc.
Thanks
It’s simpler to see George Brown’s creation of semi-independence for the Bank of England and George Osborne’s OBR watch dog over government’s fiscal policy as a form of feudalism. Why feudalism? Because as MMT specialist Stephanie Kelton perceptibly said we have a situation where the vast majority of people tacitly believe “money grows on rich people” and if that isn’t feudal in outlook I don’t know what is! This money is of course the unit of account and medium of exchange a country needs to make use of resources in an efficient way as possible and hopefully a caring way for all citizens.
I can’t help thinking we ought therefore to be linking “money feudalism” to the belief in Father Christmas in the sense that most adults haven’t given up in believing in Father Christmas if they tacitly believe money only grows on rich people. The truth is though this doesn’t make any sense we need two Father Christmases (or Mother Christmases to be gender neutral) one to be able to create money debt-free and the other with debt. This though doesn’t really work completely as an analogy because one these “Christmas” persons needs to be senior to the other to regulate the economy in the interests of all because market investment uncertainty over profits and private sector desire to save reduces demand for resource use. Not only that a senior “Christmas” person is needed with the money power to deal with emergencies such as financial crashes, pandemics, wars etc.
We haven’t ended there, however, we need a proper functioning democracy not a First Past The Post one to make sure that the senior “Christmas” person doesn’t start colluding with the junior one against the interests of the many. Much hope is being pinned on Zach Polanski to recognise all of the above but we need to see evidence of it and that he doesn’t kow-tow to the pseudo-Marxists who’ve joined the Green Party like Grace Blakeley and James Meadway. Pseudo because they tacitly subscribe to the feudal belief money grows on rich people by denigrating MMT!
Thanks
I know you are travelling today but if you get the chance do listen to today’s Guardian Today in Focus podcast about Zack Polanski. The relevant passage is about 25 minutes in where the presenter (Nosheen Iqbal) then interviews the Guardian’s chief leader writer Randeep Ramesh and discusses Polanski’s argument that there is an economic consensus that the neo-liberal economic model is broken and Ramesh says “possibly that was the one error that he made, but there are plenty of economists that agree with him. I can name some, but I don’t think your listeners need to know that”. It was a staggeringly evasive response designed to evade discussing one of the most important issues of the day. It was the type of response which, back in the day when I cross-examined witnesses for a living, demonstrates that he had something to hide and therefore would press on probing him to elaborate. Ramesh has just demonstrated, with this evasive response, how poor a journalist he is and how much the Guardian has been captured by the anti-social neoliberal mindset.
However, the overall impression I got from the podcast is that the establishment are well and truly rattled and are losing the argument with young people who seek alternatives. Those of us GOGs (Grumpy Old Gits) who reached adulthood in the days before Thatcher know that there always was an alternative and I see one of my roles as supporting, based on our real world experience, the young in forcing change.
On a related issue, Owen Jones’s latest short podcast on Hilary Clinton is an impassioned exposition of all that is wrong with the current political class. It is also recommended listening.
Travel well and keep safe.
Many thnks.
I have train time (I always avoid driving if I can). I will listen.
Randeep Ramesh doesn’t want to have to admit to himself that he tacitly believes money (the medium of exchange and unit of account) only grows on rich people! Therein lies the heart of Thatcher’s Neoliberalism which has turned out to be more antisocial than prosocial. We’ve now ended up with the “Single Transferable Party” because of the above money creation belief. Time to read that part of her 1973 Conservative Party Conference speech where she said the following:-
“One of the great debates of our time is about how much of your money should be spent by the State and how much you should keep to spend on your family. Let us never forget this fundamental truth: the State has no source of money other than money which people earn themselves. If the State wishes to spend more it can do so only by borrowing your savings or by taxing you more. It is no good thinking that someone else will pay—that “someone else” is you. There is no such thing as public money; there is only taxpayers’ money.”
https://www.margaretthatcher.org/document%2F105454
Note that Margaret Thatcher never did tell anyone how and by whom the country’s money as a unit of account and medium of exchange was created. No doubt as Stephanie Kelton’s quip she tacitly believed it “grew on rich people”! With that you have the central core belief underlying Neoliberalism/Libertarianism and as we’ve just discovered some Marxists!
Another problem – indicative of an entrenched mindset – is that it’s forecasts are always wrong. Ok, so the weather forecast is almost always wrong too, but you would hope in a more or less random manner – sometimes they predict rain and it is sunny, or vice versa, or the timing is a bit off, and the rain arrives not at 1pm but noon or 2pm.
But the OBR is systematically wrong in the same direction. Why haven’t they changed their methodology? Because it is a dogmatic belief. All things being equal, surely we must return to trend sometime. Well, all things are no equal.
For example, the “hair” diagrams for their productivity forecasts: always predicted to rise and never doing so, time and again, for over a decade. Perhaps they should check their assumptions.
Much to agree with
The poll formatting looks off. Probably not fixable on a train!
Done
Thanks
I find them really fiddly for some reason
OBR
Obviously
Bloody
Repressive
So, Agreed.
Many of the figures/evidence that are used in The Taxing Wealth 2024 report use OBR figures.
Does this undermine your report?
In the mean time what government figures can be relied on?
I used HMRC data in the vast majority of cases. So, no.
Yes, get rid of the OBR. It was made for one purpose and cannot be reformed. The first time the Tories got back in, we’d have to start all over again.
Still relevant 55 years later:
https://www.youtube.com/watch?v=8EVktmmOz8E
‘….what the Office for Budget Responsibility ignores are a whole range of issues. They focus only on money and never on outcomes. They don’t care about full employment or the NHS and its capacity to meet the needs of people. They aren’t worried about housing and infrastructure. They don’t care about the climate transition, or social well-being and inequality.’
In which case the OBR is highly irresponsible !
So, yes, it is way past time to get rid of it, and for our government and our politicians to do their actual jobs and take responsibility themselves.