Text of my latest Lords speech
The OBR is set up to fail. The Treasury asks it to perform an impossible task. As someone who has in past jobs had to advise and comment on economic forecast models, the one piece of advice I would give is to never have a spot forecast for something as difficult as a deficit or an inflation rate five years out. To make sure the OBR fails, the Government set it the task of forecasting without allowing it to make any variations to policy. We all know that, over a five-year period, there is going to be at least one general election, and sometimes Governments get so unpopular that there can be a very major change of Government, with a change of policy. We also know that, over a five-year period in this impatient world, Prime Ministers often get fed up with their Chancellors, or parties get fed up with their Prime Ministers, so there can be changes of personnel and a series of changes of policy from that as well. So, it is a totally unrealistic assumption.
What has the OBR done with its problems this time? The OBR tells us that inflation will be a very timely 2% in every year of the last four years of the forecast. I wish it was so, but experience says it is unlikely. The OBR says that the oil price will gently gyrate between $62 and $67 over the forecast period. I know that these are annual averages, so that reduces some of the volatile swings that we are seeing. But, again, that is a heroic or inaccurate forecast. I suggest that there will be considerably more volatility. If we got an early end to the war and things develop more favourably, you could even end up with considerably lower oil prices. In the meantime, obviously, we are all extremely nervous, the war continues, there is more disruption of oil trade and oil prices will stay very high.
One of the things that I fear the forecast is right about is that our own production of gas will halve. I fear that it will under current policies, and I add my voice to those who have already eloquently said that we should stop all this self-harm and get our own gas out, with more better-paid jobs and a lot of extra tax revenue—and, above all, less world CO2, which is the main preoccupation of the Government. What is not to like? The forecast also says that our oil production will be down by about a third. That, too, is subject to the same analysis, and it would be much more sensible for us to deliver our own oil.
The worrying thing in the forecast, which has already caused some alarm in this debate, is that the OBR thinks that the cost of government borrowing is going to rise in every year of the forecast. We should remember that this is from quite a high base by recent past history, because, over the last 15 months, under Chancellor Reeves, the Government have been paying a higher rate of interest for longer-term borrowing for the whole of the 15 months than on the worst day’s spike under Liz Truss, which they regularly condemn as being an unacceptably high level of interest rates. This OBR forecast says that the interest rates are going to be even higher progressively, in a gentle upwards progression, over the whole forecast. Clearly, the OBR is worried, as we all should be, by the weight of debt already issued and by the progressive increase in the amount of debt over the forecast.
This brings me to my advice to the Government. They should change the remit of the OBR to concentrate on years 1 and 2 of the forecast, where there is more chance of getting it right, and they should amend their fiscal rules again. I know they are bringing it down from a five-year fiscal forecast rule to a three-year fiscal forecast rule, but many of the arguments against five years still apply to three years. The number is invented and will not actually ever take place. Year 5 or year 3 never comes, because it is a rolling forecast, so, in effect, there is no control over the deficit. We need a control over the deficit in years 1 and 2 that is real and biting, at least by moral shame and preferably by government decision. Then I think they would find it easier to keep the interest rates under control.
There was a touching ceremony in this very Chamber last week when the Government advanced their legislation to increase income taxation by reducing the generosity of certain pension-saving allowances. The most remarkable thing about that legislation that we were asked to approve was the date of its introduction, which is to be 2029 to 2030. Why choose such a late date? Indeed, it could well be after the next election, and there could even have been a change of government by then, who might not particularly want that legislation. I assume it is great Treasury intelligence and cleverness, because that, of course, is the control year it is currently on for controlling the deficit; and so clever people in the Treasury invented a tax increase, which actually has, according to the OBR, the magic property of a large increase in tax in year 1, and then it halves for all subsequent years. You therefore get the maximum deficit-breaking effect from putting that tax in in year 5 of the forecast, probably neatly after the general election.
This is creative accounting on a grand scale, and it is a surrogate for the real job of getting that deficit down, so I would suggest to the Government that they look again at their fiscal rules. In all the years we have had OBR forecasts of deficits and fiscal rules, we have seen a mushrooming of deficits and debt under successive Governments of all parties, so it is now trebled over the OBR period. Let us therefore have an OBR with a bit of bite. Let us give it a bit of proper independence. I know it is staffed with civil servants, and they work very closely with the Treasury, but it needs to be independent enough to accurately forecast the deficit in years 1 and 2 and to help the Government control it.
March 19, 2026
The OBR was established within days of the Coalition Government coming to power in May 2010 by Osborne so probably should be closed down and reversed – like almost everything else this appalling Chancellor did.
Not easy to correctly predict these things indeed impossible really. Predicting the climate in 100 years even more absurd.
In your video last post you suggest natural wastage rather than redundancy in the state sector well perhaps given the absurd employment laws and high redundancy costs but a sensible government would ditch these and go for easy hire and fire. Much more efficient as you can get rid of the dross and keep the quality people.
March 19, 2026
See also the Peter McCormack “Net Zero is a Scam” Video with a pleasant fun northern lad & Nuclear Expert Exposing the lunacy of Net Zero and out energy policies.
March 19, 2026
His book is “GOING NUCLEAR: HOW THE ATOM WILL SAVE THE WORLD” Dr Tim Gregory.
March 19, 2026
The OBR was set up by Osborne to give some semblance of legitimacy to his ruinous policies
It has been spectacularly wrong on every forecast it has made
It is staffed by Treasury approved people who use its ridiculous forecasting to hike taxes and benefits.
It should be abolished immediately together with dozens more useless Quangos
March 19, 2026
The OBR and Government generally just ignore how people react to tax changes – simplistically/idiotically assuming that if you double a tax rate for income or stamp duty or Corp. Tax say you will double the tax take. Actually the tax take will not only not double it might even decline plus the tax take from other taxes like VAT will also decline as people will have less left to spend. People change their behaviour, leave the country, take tax advice, go on benefits, work in the black economy, work fewer hours, move there HQ to Dublin or their wife to Monaco…
March 19, 2026
Yes, the OBR is part of the establishment, so having a pop at them is futile; they do what they are told. Is Lord J confusing forecasts with assumptions in the data?
It’s a snapshot; read it like an electoral poll, and give it the same weight.
Here’s a forecast, our economy is unable to withstand any exogenous financial shocks so we are heading for serious economic breakdown. This Labour government isn’t remotely equipped to cope so we’re going to have a political upheaval as well. Take precautions.
March 19, 2026
The aim of Osborne with the OBR what prob. to try to con lenders into lending to the UK more cheaply (as will Gordon Brown’s disastrous private finance initiative (PFI) deals. I do not think that most of the money men are quite so easily fooled.
Why will Hinkley Point C cost about 20 times more per MW capacity than the ones recently build in the UAE or South Korea? Red tape, politicians on the make, the legal and planning delays, DEI, the equality act, mad employment laws, Net Zero, fish protection discos, English Nature… I assume.
March 19, 2026
Unfortunately..Qué Sera!
March 19, 2026
Good morning.
We have here been talking about the OBR and others QUANGO’s for as long as I can remember. What we do not seem to talk about are the solutions to said QUANGO’s and the OBR in particular.
The OBR really does typify the State. Unable to achieve what it has set out to do without consequences. Nowhere in the Private Sector would this be tolerated. You’d be either facing massive restructuring or, bankruptcy. Both of which are ‘correcting’ factors.
The only solution to me is this. We, or the government, managed ‘before’ the creation of the OBR, so it stands to reason that we can save an awful lot of money if we got rid of it.
March 19, 2026
Indeed get rid of it and use the money saved to reduce taxes do the same for about 50% of the state. But abolish large redundancy pay offs first – a months pay off is plenty. With easy hire and fire there will be far more new jobs on offer too.
March 19, 2026
The root cause of your OBR problem seems to be the collusion whereby government can impose pretty well any measures “impact-free” 4 or 5 years out and the OBR then reports that, based on those, everything in the garden is coming up roses.
I’d say a 5 year plan is important and the answer might be to get the media to explain better to us the impact of government measures 4 to 5 years out. Also an obligation for the OBR to lay out in stark form the consequences of government policy and assumptions 4 or 5 years out on peoples living standards.
March 19, 2026
is just the cherry on top of the icing when it comes to the economics of this government.
With budgets that budget nothing, being inventive about future positions makes a farce out of economic modelling. We all know how badly the economy is doing, but our chancellor expects it to take care of itself with a little help from imagined forecasts.
This won’t end well.
March 19, 2026
I agree with all of your overview John. The only area I question is giving the OBR additional power or perhaps I should say some power.
The OBR is tasked with forecasting. That forecasting is clearly impossible because it is based on past fiscal decisions it has certainty about, plus and more important, future decisions it knows nothing about and never can.
With that being the reality, what is the point of a government department staffed with crystal ball gazers?
The Mystic Megs of the OBR are not incompetent, they are simply a comfort blanket, they are placed in the position of fall guy for government. With that being the case, can we reduce the OBR down to maybe just ten people. The purpose of their existence would be maintained i.e. the fall guys and with ten people there will be enough in the office to cover for sickness and holidays…..
March 19, 2026
With European countries lining up behind the UK in refusing to help the USA keep the strait of Hormuz open they are shooting themselves in the foot.
We badly need the oil that isn’t flowing, and will suffer due to this bottleneck, but our leaders are so determined to put 2 fingers up to Trump that they risk the price of oil going even higher and causing us all more grief.
Now that is what you call being irrational. They were just waiting to show disdain for the USA president, but this insult will hurt us because the USA is not dependent on the strait of Hormuz being free of bombs and mines
Perhaps Trump was expecting this failure to help, but it does give him the opportunity now to re-evaluate NATO and maybe even stop subsidising it for the rest of the world.
Starmer and co keep telling us this is all about international legality – It is not, it is all about the push for a global reset and a single world government, as well as all the nasties involved in destroying the West with net-0.