Election 2017: The OBR ‘should not include unfunded pledges in official forecasts’

Written by Richard Johnstone on 9 May 2017 in News

The Institute for Government says budget projections must not provide “cover for misleading intentions”

George Osborne's spending pledges in the 2015 Budget were reversed within months. Photo: PA

The Office for Budget Responsibility should not include unfunded manifesto pledges in official spending forecasts following the general election, the Institute for Government has said.

According to the think tank, the OBR – an independent fiscal watchdog – must ensure official forecasts do not provide “cover for misleading intentions”.

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In a blog post published as general election campaigns were officially launched, the IfG’s Julian McCrae and Aron Cheung also urged political parties to be “upfront and realistic” in their manifesto pledges.

They highlighted that the backdrop to the last election was public spending plans for the next five years set by then-chancellor George Osborne in the March 2015 Budget. Osborne proposed sharp cuts to expenditure without details of where these would fall.

Despite this lack of information, McCrae and Cheung said these assumptions “miraculously allowed” the OBR to forecast a surplus, which provided the basis for the Conservative’s subsequent campaign pledge to run a surplus in the public finances by 2020.

Two years on, the fiscal outlook from the government looks very different, they noted. Within two months of polling day, Osborne had revised his plans and there was no attempt to implement the supposedly planned cuts. In the Budget earlier this year, Osborne’s successor Philip Hammond revealed that the OBR now forecasts that the public finances will be in deficit until at least 2022.

Osborne’s rapid U-turn in 2015 suggested there may never have been an intention to try to meet these spending pledges, the authors said. Although it may be difficult to stop politicians from making unrealistic promises, they said “unjustified assumptions should not guide official forecasts”.

The IfG also backed the creation of a body similar to the OBR to oversee public spending, which could independently assess the validity of spending assumptions and stimulate a more honest discussion between politicians and the public.

In addition, McCrae and Cheung highlighted that the 2015 Conservative manifesto also pledged to find £12bn from unspecified welfare savings, which the party has also been unable to subsequently deliver in government.

The tough choices required to deliver on this promise proved to be unpalatable, which showed that inclusion of a policy in an election manifesto was not enough to guarantee action, they said.

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Richard Johnstone is CSW's deputy and online editor and tweets as @RichRJohnstone

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