What's happened
The UK government introduces a new law to prevent future administrations from sidelining the independent forecaster, the Office for Budget Responsibility (OBR), following former Prime Minister Liz Truss's unfunded tax cuts announcement. The law aims to ensure economic stability and market confidence by requiring the OBR to assess major taxation or spending announcements over a certain threshold. The move comes after Truss's administration shunned the OBR, leading to financial market concerns and soaring mortgage rates.
What's behind the headline?
What the papers say
According to BBC News, the new law aims to prevent future governments from sidelining the OBR, ensuring economic stability and market confidence. The Guardian highlights that the Labour government's measures reflect a social-democratic approach, focusing on nationalisation, centralised planning, and worker empowerment. The Independent reports that the 'fiscal lock' bill will require consultation with the OBR before major tax and spending changes, aiming to prevent uncosted measures and maintain fiscal stability.
How we got here
The introduction of the new law in the UK follows a controversial incident involving former Prime Minister Liz Truss, who announced
£45bn in unfunded tax cuts in 2022, bypassing the OBR's assessment. This move led to financial market turmoil, including soaring mortgage rates. The subsequent sacking of Chancellor Kwasi Kwarteng highlighted the repercussions of sidelining independent forecasters. The new legislation seeks to prevent such occurrences by empowering the OBR to assess significant economic measures, promoting transparency and accountability in fiscal decision-making.
Go deeper
- How did Liz Truss's unfunded tax cuts impact the economy?
- What are the key provisions of the new 'fiscal lock' bill?
- Why is independent forecasting crucial for economic decision-making?
Common question
More on these topics
-
The Office for Budget Responsibility is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances.
-
The Labour Party is a centre-left political party in the United Kingdom that has been described as an alliance of social democrats, democratic socialists and trade unionists.
