Chancellor Jeremy Hunt has publicly criticized Richard Hughes, the OBR chairman. Photo: Dan Kitwood/Getty Images Europe
When unpacking the mistakes in Liz Truss's mini-budget, the consequences of which ultimately affected her premiership, critics often dwell on three separate letters — OBR.
They believe that the then Prime Minister's decision not to have an Office of Budget Responsibility (OBR) overestimated the numbers for his huge tax cut package.
It was one of many factors that spooked markets: the way the cuts were financed by massive borrowing, the recent sacking of the chief finance minister and the swift promise of further tax cuts.
But the lesson taught by those who shook their heads when interest rates on the government's long-term debt rose sharply was that ignoring or going against the OBR was foolish.
This was done not only by many economists and political opponents. But so are the Tories, and not least Jeremy Hunt, the man appointed to clean up the financial mess.
The Chancellor, who took over the role in the final days of Truss's government and was retained in the position by Rishi Sunak, stressed the importance of the OBR.
In his financial reports ahead of Today, he thanked the OBR, the government's independent economic forecaster created by George Osborne, for its work.
Privately, many Tories acknowledge that there is a need to create space for debate on reform and how the OBR's influential five-year forecasts influence policy-making has disappeared since the collapse of the Truss project.
That is why Mr Hunt's public criticism of Richard Hughes's address to the BBC on Thursday, chairman of the OBR, is so compelling.
Mr Hughes did not hold back in his latest appearance before a House of Lords committee. month on how Mr Hunt and his Treasury are handling forecasts for future government spending.
The details lie in a blurry mix of politics and economics. The Chancellor has said for years since the election that he plans to increase annual government spending by just one percent above inflation. In recent years, this figure has significantly exceeded three percent.
When prices are taken into account, this means significant cuts in vulnerable departments such as the Home Office and Communities. Think tanks have said this amounts to austerity 2.0.
There is a political element to this approach. Maintaining tight limits on government spending challenges Labor to say whether it will spend more or accept big cuts. If they do the latter, the Tories will warn of secret tax rises to offset the extra spending.
Yet Mr. Hunt has also made no effort to say what the cost cuts will entail. Again, there's a technical cover: a post-election spending review will get to the bottom of all these details.
'A fantastic piece of work'
But it prompted Mr. Hughes, echoing criticism heard by other leading economists, to lay out the approach head-on.
He said: «Some people call [the forecasts] a work of fiction, but that is probably being generous when someone has bothered to write a work of fiction and the government hasn't even bothered to write down what its departmental spending plans are based on.» plans for public services.”
Now Mr Hunt has hit back. “These words are wrong and should not have been said. Governments make decisions about spending plans and reviews of them,” he told the BBC's Political Thinking podcast.
“The next spending review starts in April 2025 and obviously we don't publish our spending plans until then — no government has ever done that.”
The criticism has been particularly direct.
It also perhaps hints at a broader truth — that on the Tory benches, disenchantment with the OBR and its enormous influence on policy decisions extends beyond the purists of the Track.
Cabinet members -Sunak privately complained that they had to go out of their way to OBR bosses to convince them that the announced reforms would lead to faster economic growth.
The strength of the OBR lies in its five-year forecast. Both the Tories and the Labor Party, if Sir Keir Starmer's party comes to power, have promised to reduce the national debt over a five-year period.
This means that how the OBR crunches the numbers — their estimates of growth and spending, as well as tax revenue and debt — is seen as critically important.
< p>If the OBR suggests the government will miss its debt target, markets could be spooked, so ensuring the OBR says otherwise is a priority for all budgets and autumn statements.
Mr Hunt and Mr Sunak is not going to pay the war with the OBR. In contrast to the approach of Ms Truss and her core supporters, they will continue to defend the OBR and its approach.
But the Chancellor's backlash suggests wider Tory disillusionment with the forecaster, which could rear its head if the party comes to an end year will be in opposition.
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