A Proposal for Reforming the UK's Fiscal Policy Process

The 2025 Budget exemplified the dysfunction in UK fiscal policymaking. For over three months, the Treasury systematically and selectively briefed the media on the underlying forecasts, as documented by 14 FT articles showing a pattern of anonymous briefing, while the OBR remained silent throughout. This created a fundamental asymmetry with the media and the public, with real costs in terms of prolonged uncertainty and market volatility.

This paper uses a four-actor framework (OBR, Treasury, media and the public) to show how this asymmetry plays out throughout the forecast process. The Treasury can use selective leaks to create a narrative about the underlying forecasts, while the OBR has no right of reply and is put in an uncomfortable position.

This paper proposes a reform to the process that would see the OBR publish its pre-measures forecast three weeks before a fiscal statement — the same timing as it currently delivers it internally to the Treasury. The Treasury would then respond separately with its policy measures, therefore decoupling the analytical OBR process from political decisions.

Key benefits of this reform are: increased transparency, as all actors operate on public information about the baseline; enhanced democratic accountability, giving the opposition the opportunity to prepare informed responses instead of replying with no preparation time as currently; removing the OBR from politically contentious judgements about second-round effects of policies, instead giving it time to assess them retrospectively at the following forecast; and reducing the window for market uncertainty by providing a full published baseline and restricting speculation after the OBR publication to policy decisions.

This novel institutional design is worthy of serious consideration, guarding
the OBR’s independence while reducing the window for market volatility.