The shadow chancellor says he wants the Office for Budget Responsibility to scrutinise Labour's spending plans. Should we go further, and set up a US-style Parliamentary Budget Office?
Ed Balls, the shadow chancellor, has declared he’d like the Office for Budget Responsibility to assess Labour’s tax and spend policies before the next election. Robert Chote, the head of the OBR, and Andrew Tyrie, the Conservative chair of the Treasury select committee, have both said they think this could be a good thing. Others have immediately denounced the whole idea.
Despite the misgivings of many (including me), the OBR has turned out to be fairly independent of government (largely because of its ferociously independent chair, Robert Chote). It’s track record on forecasting hasn’t been brilliant, but then nor has anybody else’s in the past few years. It clearly doesn’t have enough resources and it still looks far too close to government.
Having a strong, independent of government, centre for analysis of proposed budgets and their impacts seems like a good idea that has gained considerable ground internationally (see this recent OECD presentation).
A recent book by Philip Joyce on the USA’s Congressional Budget Office provides a fascinating view of a serious alternative to our own somewhat anaemic efforts.
The CBO was established in the 1970s and its current mandate is to provide the Congress with:
• objective, nonpartisan, and timely analyses to aid in economic and budgetary decisions on the wide array of programmes covered by the federal budget and;
• the information and estimates required for the Congressional budget process.
Joyce details how the CBO has struggled against assaults from both sides of Congress on its reports and independence, but has nevertheless emerged as 'a powerful and influential arbiter of the economic and budgetary effects of policies'.
A Parliamentary Budget Office would not be an exact parallel, because of parliaments’ currently very different (self-limiting) role in the budget process.
Under the 300-year old Standing Order 48 of the House of Commons, only the government can make proposals to spend public money and parliament can only reject or reduce them, not make its own proposals. This has by convention been extended to taxes as well, so parliament can only limit or reject taxes, not propose them.
Although there have been minor changes to expand parliament's role in the budget process, in practice it has very little say, other than an outright rejection, over government plans. In almost 100 years there have only been about 20 successful amendments to Budgets.
So under the current system a PBO would have a very limited role in relation to Budgets, although this could change if parliament wanted it to.
The other key role of the CBO – which is also emulated in several other countries – is that it examines any policy proposals from any party for their economic and fiscal impacts. We could certainly do with that.
The past 20 years of British politics has been littered with debates which have produced more heat than light about the real consequences of different policies. Back in 2001 the Labour government was underspending by £10bn; a fact that went unreported and undiscussed in the General Election campaign of that year, and which undermined our democratic process as I pointed out at the time. A PBO could help to overcome these sorts of problems.
As it happens, next week in Manchester Margaret Hodge, chair of the Public Accounts Committee, Robert Chote and Bernard Jenkin, chair of the Public Administration Select Committee, will be discussing this and related issues about the ‘politics of public spending’. This is clearly a debate whose time has come.
Colin Talbot is professor of government and director of policy at the University of Manchester. This post first appeared on Whitehall Watch
