Office for Budget Responsibility
Based on Wikipedia: Office for Budget Responsibility
In the autumn of 2022, a British Prime Minister lasted just 49 days in office—shorter than a head of lettuce left to wilt on a livestream. The proximate cause was a "mini-budget" that spooked financial markets so badly that pension funds nearly collapsed and the pound plummeted to historic lows. But the deeper cause? The government had announced tens of billions in unfunded tax cuts without first asking a small, unglamorous office to run the numbers.
That office is the Office for Budget Responsibility, or OBR. And its brief, ignominious exclusion from the policy process became the most dramatic illustration of why fiscal watchdogs exist in the first place.
What Is a Fiscal Watchdog?
Every government faces a temptation. When politicians announce budgets, they have every incentive to present rosy forecasts. Economic growth will be higher than expected. Tax revenues will pour in. The deficit will shrink painlessly. This isn't necessarily deliberate lying—it's the natural optimism of people who want their plans to work and who face voters in a few years.
The problem is that these forecasts form the foundation of real decisions. If a chancellor says the economy will grow at 3 percent when it actually grows at 1 percent, the maths of the entire budget falls apart. Promised spending becomes unaffordable. Deficits balloon. And by the time reality asserts itself, the politicians who made the rosy assumptions may have moved on.
A fiscal watchdog exists to break this cycle. It's an independent body that produces its own forecasts, separate from the government's wishful thinking. The idea spread across developed economies in the early 2000s, inspired partly by the Congressional Budget Office in the United States, which has provided nonpartisan budget analysis since 1974.
Britain came late to this party. For decades, the Treasury produced its own forecasts, and those forecasts had a curious habit of being optimistic in ways that flattered whichever party was in power.
Born in Crisis
The OBR emerged from the wreckage of the 2008 financial crisis. By 2010, Britain's budget deficit had ballooned to over 10 percent of gross domestic product—a peacetime record. The incoming Conservative-Liberal Democrat coalition government, led by David Cameron and Nick Clegg, wanted to implement severe spending cuts. But they faced a credibility problem.
If they used Treasury forecasts to justify their austerity programme, critics would say the numbers were cooked to support a predetermined political agenda. The solution was to create an independent forecaster that could certify whether the government's plans added up.
Chancellor George Osborne announced the OBR in his first official speech after taking office in May 2010. The name itself tells you something about British political culture—it's not called the "Economic Forecasting Office" or the "Fiscal Analysis Bureau." It's the Office for Budget Responsibility, as if responsibility were a discrete thing that could be housed in an office and occasionally consulted.
How the OBR Actually Works
The heart of the OBR is something called the Budget Responsibility Committee, a panel of three economists who sign off on all major forecasts. These aren't civil servants who can be shuffled around by ministers. They're appointed for fixed terms and can only be removed through a vote in Parliament—a deliberate design to insulate them from political pressure.
Twice a year, when the Chancellor delivers a Budget Statement or Spring Statement, the OBR publishes its "Economic and Fiscal Outlook." This document is dense, technical, and—for budget wonks—genuinely gripping. It contains five-year forecasts for everything from unemployment to tax receipts to the cost of state pensions.
Crucially, the OBR doesn't just predict the economy in a vacuum. It incorporates whatever tax and spending measures the Chancellor has just announced, then calculates whether those measures will actually achieve what the government claims. This is called "policy costing."
Think about what this means in practice. The Chancellor wants to announce a tax cut and claim it will pay for itself through economic growth. The OBR examines that claim, runs it through their economic models, and either endorses the costing as reasonable or says it's wishful thinking. They even assign uncertainty ratings to each costing, acknowledging that some estimates are shakier than others.
The Targets Game
British governments love fiscal targets. They sound serious. They create headlines. They give chancellors something to point to when claiming fiscal discipline.
The current targets, as of late 2024, require two things. First, something called the "cyclically-adjusted current budget" must be in surplus by 2029-30. This is economist-speak for: if you strip out the ups and downs of the economic cycle, day-to-day government spending shouldn't exceed day-to-day government revenue. Second, public sector net debt—what the government owes minus what it's owed—must be falling as a share of the economy by that same date.
The OBR's job is to assess, with cold mathematical precision, whether current policies give the government at least a 50 percent chance of hitting these targets. Not certainty—just better-than-even odds.
This might sound like a low bar, but consider the alternative. Without an independent referee, governments could announce targets, claim they were meeting them, and no one would have the technical capacity to argue otherwise. The OBR provides the arguing capacity.
Beyond the Immediate Future
Economic forecasting is hard. Five years out, the uncertainty is enormous. But some fiscal challenges operate on even longer timescales.
Britain, like most developed nations, has an aging population. More retirees means more pension payments and more healthcare costs. Fewer workers means less tax revenue. These trends unfold over decades, not years, and they can make a budget that looks sustainable today become catastrophic in 2050.
The OBR publishes an annual "Fiscal Sustainability Report" that peers into this long-term future. It asks uncomfortable questions. What happens to the debt if healthcare costs grow faster than the economy? What if interest rates stay high? What if productivity growth never recovers from its post-2008 slump?
Since 2017, the OBR has also produced a "Fiscal Risks Report" that catalogues things that could go wrong—from financial crises to pandemics to the fiscal consequences of climate change. These reports don't make predictions. They identify vulnerabilities, stress-test the public finances against hypothetical disasters, and generally try to ensure that bad surprises have at least been contemplated.
The Devolution Complication
Britain isn't really one country when it comes to taxes. Scotland has its own parliament with significant tax powers. Wales has its own assembly with more modest fiscal authority. Northern Ireland has its own arrangements.
This creates a forecasting headache. If Scotland sets different income tax rates than England, someone needs to forecast how much revenue those rates will actually generate. The OBR took on this role, producing separate forecasts for devolved taxes in Scotland since 2012 and Wales since 2014.
Scotland also has its own fiscal watchdog, the Scottish Fiscal Commission, which produces its own forecasts. The two bodies have a statutory duty to cooperate—they share data, compare methodologies, and try to ensure their forecasts are at least consistent with each other, even if they sometimes disagree.
The Welfare Cap
In 2014, the government introduced something called the welfare cap—a ceiling on how much could be spent on certain social security benefits. If spending threatens to exceed the cap, ministers must either change policy to bring costs down or ask Parliament to raise the cap.
The OBR serves as referee. It forecasts welfare spending, monitors whether that spending is on track to breach the cap, and formally assesses performance at the start of each new Parliament. This might sound like a technocratic detail, but it has real consequences. It's harder for governments to quietly let benefit costs spiral when an independent body is publicly tracking every deviation.
The Lettuce Incident
Which brings us back to September 2022 and the most spectacular vindication of fiscal watchdogs in recent British history.
Liz Truss had just become Prime Minister. Her Chancellor, Kwasi Kwarteng, announced a "mini-budget" containing £45 billion in unfunded tax cuts—the largest tax reduction in half a century. They wanted to shock the economy into higher growth.
They did not ask the OBR for a forecast.
This was extraordinary. The OBR existed precisely to assess whether government fiscal plans added up. Bypassing it wasn't illegal, but it was a screaming signal that the government didn't want its sums checked. Markets noticed.
Within hours, the pound collapsed to its lowest level against the dollar in history. Bond yields spiked so severely that pension funds—which had made leveraged bets on stable interest rates—faced margin calls they couldn't meet. The Bank of England had to launch an emergency intervention to prevent a full-blown financial crisis.
The government reversed almost every measure in the mini-budget within weeks. Kwarteng was sacked. Truss resigned 45 days later—the shortest-serving Prime Minister in British history. A tabloid newspaper set up a livestream asking whether she would outlast a head of lettuce. The lettuce won.
The lesson was clear: you can govern without a fiscal watchdog, but probably not for long.
Has It Made a Difference?
The OBR has been reviewed multiple times since its creation, and the verdicts are generally positive.
Kevin Page, who served as Canada's Parliamentary Budget Officer, conducted an external review in 2014. He concluded that the OBR had "laudably achieved the core duties of its mandate" and succeeded in "reducing perceptions of bias in fiscal and economic forecasting." The key word is "perceptions"—it's difficult to prove that forecasts are less biased, but people believe they are, which itself has value.
The International Monetary Fund, not known for excessive praise, called the OBR's analysis "best-practice" and suggested it could serve as a benchmark for other advanced economies. The European Fiscal Board argued in 2018 that the OBR had retained "a high degree of public trust."
Trust, in fiscal policy, is not a soft concept. It's the foundation of borrowing costs. When investors trust that a government's numbers are real, they lend more cheaply. When that trust evaporates—as it did briefly in September 2022—borrowing costs spike, and taxpayers foot the bill for years.
The November 2025 Disaster
Independence is not a permanent achievement. It requires constant maintenance.
On November 26, 2025, the OBR accidentally released its budget report before the Chancellor had delivered her budget speech to Parliament. In the carefully choreographed ritual of British fiscal announcements, this was catastrophic. Markets moved on leaked information. The element of surprise—politically important if not economically meaningful—was destroyed.
The internal investigation, led by the OBR's Chief of Staff, was scathing. It described the leak as "the worst failure in the 15 year history of the OBR" and placed "ultimate responsibility" with "the leadership of the OBR."
Richard Hughes, who had chaired the OBR since 2020, resigned immediately.
The timing was especially painful because, in the days between the leak and his resignation, Hughes had publicly contradicted Chancellor Rachel Reeves. She had justified her budget by citing a large "fiscal black hole"—a gap between revenues and spending inherited from the previous government. Hughes suggested she had overstated its size.
Was this legitimate independent analysis or inappropriate political commentary? The line between the two is genuinely unclear for a fiscal watchdog. The OBR is supposed to challenge government assumptions. But challenging them publicly, just after your office has made an embarrassing operational mistake, looks less like independence and more like score-settling.
The Optimism Problem
Even independent forecasters can have systematic biases. Just before the November 2025 crisis, the Centre for Policy Studies—a think tank generally sympathetic to lower taxes and smaller government—published a study of OBR forecasts from 1990 to 2019.
Their finding was striking: in 54 medium-term forecasts, actual government spending was always higher than predicted. Not sometimes. Always.
This could reflect many things. Governments might announce plans to control spending, get the OBR's endorsement, then quietly abandon those plans later. Economic shocks might regularly push spending higher. Or the models might have a built-in tendency toward optimism.
Whatever the cause, it suggests that even independent fiscal watchdogs can't fully escape the gravitational pull of wishful thinking. They may be less biased than Treasury forecasts, but "less biased" is not the same as "unbiased."
A Small Office with Large Influence
The OBR employs only a few dozen people—tiny by government standards. It has no enforcement power. It can't stop a government from announcing unfunded tax cuts or ignoring its warnings about long-term debt sustainability.
Its power is purely informational. It puts numbers into the public domain that would otherwise remain hidden or manipulated. It gives journalists, opposition politicians, and financial markets ammunition to hold governments accountable. It makes it harder, though not impossible, to govern by wishful thinking.
This might sound modest. But in a democracy, information is the foundation of accountability. Voters can't punish governments for reckless fiscal policy if they don't know the policy is reckless. The OBR's role is to ensure they know.
The lettuce incident proved what happens when that role is bypassed. For a few chaotic weeks in autumn 2022, Britain experimented with governance without independent fiscal scrutiny. The experiment failed spectacularly, expensively, and faster than anyone expected.
The OBR remains imperfect. Its forecasts are sometimes wrong. Its independence can be compromised by operational failures. Its models may have systematic biases. But the alternative—returning to an era when governments marked their own fiscal homework—is clearly worse.
In the dry, technical world of budget forecasting, that counts as a success story.