By strengthening the OBR, Reeves has created severe difficulties for herself. Vital decisions about our economic future should be made by politicians, not unelected quangocrats, says Paul Ormerod

Later today we will know for certain what is in Rachel Reeves’ Spring statement, a budget to all intents and purposes. But as is usually the case these days, substantial parts of it have been widely trailed in the media.

A key theme in the commentaries on the topic is that the Chancellor has boxed herself into a corner. 

Following the massive rise in the overall tax burden in the autumn measures last year, she has ruled out further increases. On the spending side, welfare benefits are to be reduced.  The civil service is being asked for efficiency savings and jobs will be lost.

Certainly there is huge scope for improvements in the performance of our public services.  As is by now well known, productivity in the public sector as a whole has shown no increase since 1997, a period of almost 30 years.

We might well applaud these proposals as being perhaps the most sensible step which Labour has taken since obtaining office in the July 2024 general election.

But Reeves has created serious political difficulties for herself. The civil service unions are girding up for a fight. Substantial numbers of Labour MPs are expressing serious concerns.  

Reeves in a corner

The proximate cause of all her troubles seems to be the forecasts which will be published by the Office for Budget Responsibility (OBR). According to numerous leaks, the OBR has reduced the rate of growth of GDP which it is projecting. And the consequence of less economic activity is lower tax receipts for the government, which in turn puts pressure on the public finances.

The OBR was set up shortly after the 2010 election by the then Chancellor George Osborne. Its purpose is to provide independent forecasts for the economy, replacing those which were previously carried out by the Treasury.

Reeves doubled down on the importance of the OBR by, for example, legislating that no government can announce fiscally significant measures without being subject to an independent assessment by the OBR.