Dutching the fudge: enlarging the OBR’s role to scrutinise manifestos

Simon Wren-Lewis calls for an extension of the remit of the Office for Budget Responsibility, (OBR), the fiscal watchdog set up by Coalition Chancellor George Osborne, echoing Giles Wilkes.  The idea is to include in their services the option to scrutinise contending political parties’ fiscal plans, and in particular, to check that strategies for the overall deficit are consistent with individual policy proposals.  In this way the OBR would resemble the Dutch Bureau for Economic Policy Analysis.

I heartily agree with this proposal.  The idea, as Simon explains, is that, given the option, parties will feel compelled to take it up, for fear of not looking serious.  And this will help us see more clearly what parties intentions are.

I suspect the benefit will go deeper.  Knowing that they won’t be called on exactly what their fiscal ambitions are, and how they connect with their policies, parties probably don’t feel the need to think them through so deeply.  With limited resources, effort is diverted towards communication, story-telling, coherence, prioritising, adapting the policy message to the unfolding narrative of the campaign.  There is no money or patience left for nerds with large Excel spreadsheets.  So impending transparency will probably also deepen the parties’ understanding of the costs of social policy and macroeconomics.  Who knows, that benefit might even filter out to the rest of us.

If the OBR were tasked with this, it would raise some issues.

First, there is the issue of parties’ funding.  If I am right that fiscal detail is not just hidden, but actually does not exist, then other things equal, parties will have to find more money to undertake the work.  (Or:  perhaps it would be a beneficial side-effect that they would be forced to spend less on spinning and advertising).  Major parties struggle financially, and regularly expose themselves to embarrassment by courting funding from dubious donors.  It’s hard to see where that money would come from.   So OBR costing of election manifestos brings to the fore the question of whether parties should receive state funding.

Second, and relatedly, there is the problem of whether the incumbent Government is at an advantage going into an election.  Although it is currently required to work up its manifesto using its own resources, and not those of the civil service, it does so after a few years working closely with armies of state paid analysts and their marvellous spreadsheets drilling into the detail of public spending and taxation.  It surely has a much better idea what works and what doesn’t, and how much things cost, than a rusty opposition party.

Third, such costings will pitch the OBR into much more heated and more regular political controversy.   That will shine a light on the institution:  the appointments processes for its head [currently Robert Chote] and its advisory board, and its hiring and resourcing.  These have to be as insulated from government interference as possible.  Otherwise a suspicion would lurk that the OBRs costings are skewed to make sure that life is more pleasant for it after the election.  What would that mean?  I speculate, of course, but if there were a clear leader in the polls going into an election, the OBR would have to feel confident that bashing the leading party’s fiscal plans would not prompt a sacking or resource squeeze once that party took over.  Chote and his staff have done an excellent job bedding down the new OBR and establishing a reputation for independence of mind, but do they have an institution that is strong enough to weather the stormier environment of heated election campagins?  The acrimony that developed over the Treasury mandarin Nick Macpherson’s intervention on Scottish Independence – in particular the reflex of the SNP to dismiss the analysis as propaganda – is a case in point.

Some existing working practices might prove hard to sustain if the OBR took on this enlarged and more politically charged roll.  For example, currently, the OBR uses a macroeconomic forecasting model that is jointly run and maintained by itself and the Treasury.  In the OBR’s Memorandum of Understanding governing its working relationship it’s clear that the OBR also draws on other working level analytical support in the course of writing its reports.  I’d suggest that it would be better able to discharge this enlarged roll if it ran its own model, and was as independent of other analytical support as possible.


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