Sunak 'should consider enabling OBR to probe departmental spending plans'

Think tank’s growth proposals urge PM to consider Vaccine Taskforce-inspired interventions for key goals
Sunak at the Cop27 climate conference. The net-zero agenda has been "allowed to slip", the IfG warned. Photo: Gehad Hamdy/dpa/Alamy Live News

By Jim Dunton

22 Nov 2022

Expanding the Office for Budget Responsibility's remit to allow it to consider individual departments' spending plans could form part of a considered economic growth drive for Rishi Sunak’s new administration, the Institute for Government has said.

A month after Sunak succeeded Liz Truss as prime minister, an IfG report argues that identifying a need to increase growth in the UK economy was the one thing that Truss and her first chancellor, Kwasi Kwarteng, got right during her disastrous and short-lived tenure in No.10.

However, the report's author, Giles Wilkes, said Sunak needs to set out a “competent, calm and consistent” plan.

Nevertheless, Wilkes – a former special adviser to Theresa May when she was PM and Vince Cable when he was business secretary – cautioned against giving the Treasury a “free hand” on spending and growth decisions, or attempting to “run” growth out of No.10. The interests and “deep expertise” of other departments need to be heard in a “considered way”, his report said.

Wilkes suggested continuing work on key Boris Johnson-era strategies, including the levelling up agenda; the 2021 skills white paper; increased research and development spending; and better coordination of efforts to get the economy and the public behind the net-zero agenda.

But his IfG paper also proposed that new measures to drive economic growth could include changing the remit of the Office for Budget Responsibility to allow it to probe the impact of departmental spending.

Wilkes said that the economic fallout from Truss and Kwarteng’s contempt for Treasury “orthodoxy” and OBR forecasts should prompt Sunak to declare his intention to treat the UK’s economic institutions with respect.

“That does not mean they should be immune to reform or review,” he said. “The OBR, for example, has played a valuable role bolstering confidence in the accuracy of forecasts of fiscal revenues – but its purview does not extend to any evaluation of decisions about departmental spending, which is worth considering.”

Wilkes added that 25 years after then-PM Tony Blair and chancellor Gordon Brown gave the Bank of England operational independence over monetary policy, it “would not be inappropriate” to review the Bank, its 2% inflation target, and its performance in pursuing it.

His report also suggested that there may be scope for applying lessons from the UK Vaccine Taskforce’s success to other policy goals.

“The same model might be pursued in other areas, such as the delivery of nuclear power or battery manufacturing capacity,” Wilkes said.

Wilkes cautioned Sunak against attempting to run growth from No.10 and said this winter would “reinforce the point” with a host of headline-grabbing priorities.

“Sunak will be preoccupied with urgent political and cost-of-living problems for at least the next six months – after that, he will turn to the run-up to what will be a very challenging general election,” he said.

“No.10 is simply not equipped to do it all, and Sunak himself enjoys the counsel of just a handful of qualified advisers. Downing Street cannot ‘own growth’. It should not attempt to.”

Less than a week after chancellor Jeremy Hunt’s stark Autumn Statement – which Wilkes described as a “dismal outlook” – he said Sunak would be under pressure to lighten the mood with a plan to unleash growth.

“This is understandable, and one of the few things the Truss government got right: the UK has a chronic low-growth problem,” Wilkes said.

“But repeated vows to ‘unleash’ it are part of the problem. Raising long-term productivity requires the steady accumulation of countless small improvements within a predictable framework, not sudden acts of political daring.

“There is plenty that Sunak and his government can be getting on with. The Johnson administration left behind a large, half-finished to-do list, covering skills, research and development, the levelling up agenda and much more.

“The net-zero agenda has been allowed to slip in the past few months of political turmoil, and could do with a reboot.”

Wilkes concluded: “Above all, business is crying out for a period of institutional stability so it can once again plan its investments with some confidence. This may not get the blood racing like promises to ‘rocket-boost’ the economy, but after six years of turmoil a period of calm is just what the economy needs.”

Share this page