The changes could prevent a repeat of the mistakes made in Liz Truss’s mini-budget, the party says.
Image source, EPALabour has promised to hand more powers to Britain’s economic watchdog if it wins the next election.
It comes after Liz Truss’s mini-budget, delivered without OBR analysis, which led to market chaos and a fall in the value of the pound.
Under the plans, the Office for Budget Responsibility (OBR) would be free to publish forecasts and analysis alongside any tax and spending changes.
Labour said the package would “bring stability back to our economy”.
Speaking to the BBC, shadow chancellor Rachel Reeves also said that, under Labour, all major tax and spending decisions would by law be announced in November, to reduce uncertainty for businesses and families.
Currently the government typically set outs budgets in the spring, followed by an autumn statement which can also contain significant measures.
Under Labour’s plans, only very minor policy changes would be permitted in a spring update to Parliament.
The OBR usually produces forecasts only twice a year, to accompany the spring budget and autumn statement – but does provide monthly commentary on the economy.
‘Never again’
The package, which Labour is calling its “fiscal lock”, represents an attempt to seize the mantle of fiscal responsibility – and to remind voters of Ms Truss’s mini-budget, whose anniversary falls on Saturday.
Some argue that Ms Truss’s decision not to ask the independent OBR to assess her measures in advance was a big factor in the economic and political chaos which ensued, bringing about her rapid political demise.
If the government feels it has to rush out new measures without the OBR having time to put together its forecasts – for example in response to a financial crisis or another pandemic – the OBR would be given the power to publish analysis rapidly afterwards, Ms Reeves told the BBC.
“Never again can a chancellor be allowed to repeat the disastrous mistakes of last year’s mini-budget,” Ms Reeves told the BBC.
The OBR was set up by former Chancellor George Osborne, when the Conservatives entered government in 2010.
Responding to the Labour policy, Andrew Griffith, the economic secretary to the Treasury, said: “The Conservatives created the OBR to curb Gordon Brown’s reckless spending binge.
“The current Labour Party is on the same, destructive path with their plan to borrow £28bn a year which would fuel inflation and push up interest rates even further.”
The Institute for Government (IfG), a think tank, said Labour’s proposals would “improve how fiscal policy is made”.
Tom Pope, deputy chief economist at the IfG, said: “The proposed measures to strengthen the OBR’s hand are welcome.
“The mini-budget demonstrated the folly of announcing large permanent changes to fiscal policy without an accompanying forecast, and Labour’s changes would ensure this could not happen again.”
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