TUC demands root and branch review of OBR ahead of October budget

The Trades Union Congress has called on Chancellor John Healey to order a comprehensive review of the Office for Budget Responsibility, arguing that the independent watchdog’s forecasting models are obstructing economic growth. The union contends that the OBR’s approach assumes public spending crowds out private capital, an assumption it claims is rooted in outdated austerity-era thinking and disputed by some economists.

Paul Nowak, the TUC’s general secretary, described the watchdog as a "millstone preventing good growth," stating that its models "bake in" false assumptions from a bygone era. Nowak urged Healey to use the upcoming budget on 28 October to re-examine the assessments of the body, asserting that only a "root and branch" review can bring the OBR into the modern economic mainstream.

The TUC’s critique is supported by thinktanks across the political spectrum, including the right-leaning Progress and the left-wing New Economics Foundation. Louisa Dollimore of the Good Growth Foundation previously characterised the OBR as a "backseat driver with out-of-date maps" that obstructs long-term planning at a critical moment for British investment.

Concurrently, the union is advocating for the strengthening of the National Wealth Fund to boost long-term investment. The TUC is calling for a change in the fund’s mandate to allow investments with returns taking up to 15 years, arguing this flexibility, built into revised fiscal rules, could reindustrialise Britain. The National Wealth Fund currently invests in infrastructure projects and backs British businesses to "crowd in" private investors.

Tensions regarding fiscal policy are heightened by warnings from the incoming OBR chair, Jonathan Haskel. Haskel, who replaces Richard Hughes, told the Treasury select committee that Britain is "not in a very good fiscal position" and predicted somewhat higher interest rates and weaker GDP growth in the medium term.

While the TUC argues the government must release the "handbrake" on investment, concerns remain about market reactions. Oxford Economics consultancy warned that if the new administration loosens fiscal policy without an underlying improvement in public finances, it risks sending a negative signal to bond markets.

In response, a Treasury spokesperson reaffirmed that fiscal discipline is the "bedrock of economic stability" and national security. The spokesperson stated that the chancellor and prime minister are aligned on meeting fiscal rules and reducing debt, with decisions to be set out at fiscal events rather than through routine commentary on proposals.