The Trades Union Congress (TUC) argues that the OBR has a kind of “hard‑wired” commitment to austerity economics, meaning its forecasts push governments toward spending cuts or tax hikes rather than growth-friendly investment. (The Guardian)
According to this view, the OBR downplays the long-term economic benefits of public investment (in infrastructure, welfare reform, etc.), leading to overly cautious fiscal policy.
Overly Pessimistic Growth Forecasts
In March 2025, the OBR halved its economic growth forecast for the UK (from ~2% to ~1%) for the year. (The Standard)
That downgrade forced the government (led by Chancellor Rachel Reeves) to cut welfare spending and limit day-to-day departmental spending to keep within its self-imposed fiscal rules. (Investing.com)
Critics say these conservative forecasts make it very hard for the government to justify big, pro-growth spending plans.
Forecast Timing & Volatility
The TUC and others argue that frequent and large forecast revisions (especially negative ones) create budget “headroom” problems: when the OBR worsens its outlook, the Chancellor might feel forced to raise taxes or cut spending quickly. (The Guardian)
This risk-averse behavior may hamper long-term planning and investment.
Underestimating Behavioral Effects
Prime Minister Keir Starmer has criticized the OBR for not “scoring” (i.e., factoring in) how reforms might change people’s behavior — for example, how welfare reform could encourage more people into work, generating economic benefits. (Financial Times)
If the watchdog underestimates how policies will boost employment and growth, governments might be too cautious.
Forecast Errors
The OBR itself has admitted to “genuine errors” in past forecasts — for example, significantly underestimating inflation. (The Guardian)
Such mistakes reduce trust in its accuracy and raise the question: are its conservative forecasts holding back more ambitious fiscal policies?
Structural Constraints on Fiscal Policy
Some critics argue that the OBR’s influence gives it an “effective veto” on fiscal decisions. For instance, the New Economics Foundation (NEF) has argued for replacing the OBR with a more growth‑friendly body (an “Office for Fiscal Transparency”) because they believe the OBR’s forecasts limit the government’s flexibility. (The Times)
They argue that by strictly enforcing fiscal rules based on its forecasts, the OBR forces governments to lean into spending cuts or tax rises when forecasts worsen — even if long-term investment would be better for growth.
Data Reliability Issues
There are also concerns about the quality of the data that the OBR uses. For example, problems at the Office for National Statistics (ONS) could make the OBR’s forecasts less reliable. (The Guardian)
If the underlying data is shaky, the OBR’s forecasts might be more conservative than warranted, further constraining policy.
IMF & External Pressure
The International Monetary Fund (IMF) has suggested changes to the UK’s fiscal framework that align with some of these critiques — for example, producing only one full OBR forecast per year instead of two, to reduce volatility. (MoneyWeek)
The IMF argues that too frequent forecasts (and the strict rules tied to them) can force reactive policy changes rather than stable, long-term planning.
Why This Matters (Implications)
Policy Risk: If fiscal policy is too constrained by pessimistic forecasts, the government may underinvest in important areas (infrastructure, green economy, social programs) that could boost long-term growth.
Political Pressure: The OBR’s forecasts directly affect how much “fiscal headroom” the government has. When its forecasts worsen, the Chancellor may be forced to make politically difficult decisions (tax rises / spending cuts).
Growth vs. Stability Trade-off: Critics think the watchdog’s role is tilted too much toward protecting short-term fiscal discipline at the expense of structural economic growth.
Reform Debate: There’s a growing call (from the TUC, NEF, and others) to reform or even replace the OBR to give more weight to growth‑oriented analysis.
Who’s Saying It
TUC (Trades Union Congress): Very vocal; argues the OBR is “strangling” growth. (The Guardian)
New Economics Foundation (NEF): Think tank pushing for structural change. (The Times)
Prime Minister Keir Starmer: Criticized the OBR for not scoring behavioral impacts of welfare reforms. (Financial Times)
IMF: Suggests refinements to the fiscal framework aligned with critics’ concerns. (MoneyWeek)
Counterpoints / Risks of Reform
Independence Is Valuable: The OBR was created to give independent, credible forecasts so that governments don’t make unrealistic promises. Weakening it could undermine trust.
Forecasting Is Hard: The OBR itself has said that some forecasting errors are inevitable, especially given global shocks (e.g., energy prices, geopolitics). (The Guardian)
Fiscal Discipline: Without a strong watchdog, there’s a risk that governments could overpromise and underdeliver, borrowing unsustainably.
Bottom Line
Critics argue that the OBR’s conservative forecasting and rigid role are holding back economic growth, because they push the government toward austerity and make it difficult to invest in long-term growth.
There is real momentum — from trade unions, think tanks, and even international bodies like the IMF — to reform how the OBR works, to give more weight to growth-focused policy.
But reform would be tricky: it risks weakening independent fiscal oversight, which is also important for credibility and market confidence.
Good question. There is indeed growing debate in the UK that the Office for Budget Responsibility (OBR) — the independent fiscal watchdog — may be acting as a drag on economic growth. Below is a breakdown of the key criticisms, some case-studies / examples, and expert commentary. (If you like, I can also include empirical research or a longer literature review.)
Key Criticisms & Case Studies
“Strangling growth” – TUC’s critique
The Trades Union Congress (TUC) has warned that the OBR is at risk of “strangling growth.” Paul Nowak, the TUC general secretary, argued that the watchdog is “hardwired” to support austerity-style economics. (The Guardian)
The TUC particularly criticizes the OBR for not sufficiently valuing long-term public investment, suggesting that the watchdog undervalues the positive growth effects of investing in infrastructure or people. (The Guardian)
They argue the timing of the OBR’s revised productivity forecast (which worsened growth prospects) was poorly handled, limiting the government’s room to maneuver. (The Guardian)
Downgraded Productivity Forecasts
According to reports, the OBR carried out a “stocktake” of its forecasting models and is expected to significantly cut its productivity growth assumptions. (The Guardian)
This matters, because productivity is a key driver of long-run economic growth. A weaker productivity forecast directly tightens the fiscal headroom for the government — meaning less ability to spend or invest without breaching fiscal rules. (The Guardian)
One analysis (by Oxford Economics, as reported) suggests that “moving the OBR’s productivity forecast back in line with the less optimistic independent average projection would knock 1.4% off GDP at the end of its five-year forecast.” (The Guardian)
That in turn could force big tax rises or spending cuts: some reports suggest a hit of up to £20 billion to the public finances. (The Guardian)
Overly Pessimistic Growth Forecasts / Public Investment Under-Valued
In its November 2023 outlook, the OBR cut its growth forecast, warning of a more muted economic outlook. (The Guardian)
Some think tanks criticize the OBR for underestimating the “multiplier effects” of public investment. That is, when the government spends on infrastructure or capital, businesses respond, people find jobs, productivity rises — but critics say OBR’s model downplays these second-round effects. (Reddit)
The New Economics Foundation (NEF) has explicitly argued that the OBR’s forecasts produce a kind of de-facto veto on fiscal policy, because its conservative (or cautious) models force the government to choose between tax rises or cuts rather than bold public investment. (The Times)
In its own External Review, the OBR acknowledges that “50 MPs … argued that the OBR’s ‘forecasting errors’… could ‘be holding back the country’s recovery’.” (Office for Budget Responsibility)
Poor Timing / Coordination Impacting Policy
The timing of forecast revisions is itself controversial. For instance, some within government believe that if the OBR had revised its productivity assumptions earlier (say in 2023), then some tax cuts (e.g., pre-election national insurance cuts) might have been deemed unaffordable earlier, altering policy choices. (The Guardian)
There is tension between the OBR and the Treasury: reports suggest that the Treasury is trying to “put the squeeze” on the OBR, arguing that recent planning reforms and trade deals warrant a more optimistic forecast. (The Guardian)
Data Uncertainty
Another compounding factor: the OBR has flagged concerns over the reliability of key economic data (from the ONS, the UK’s statistics authority). (The Guardian)
Poor data quality or large uncertainty can hamper the OBR’s ability to produce stable, accurate forecasts — leading to more conservative or cautious fiscal guidance.
Why These Criticisms Matter: Implications for Economic Growth
Policy Constraints: Because the OBR’s forecasts feed directly into the government’s fiscal rule framework, more pessimistic forecasts limit what policymakers believe they can afford. That can lead to tighter public spending or higher taxes — both of which may suppress growth.
Investment Chilling: If the watchdog underestimates the benefits of public investment, the government may underinvest, missing opportunities to boost long-term productivity.
Credibility vs Flexibility Tension: The OBR is meant to provide independent, credible forecasts (which markets and governments trust). But that credibility can come at the cost of policy flexibility. Critics argue that it’s too rigid, effectively forcing austerity or very cautious policy.
Forecast Risk: Getting the forecasts wrong (or being systematically pessimistic) has real costs — not just in terms of public finance, but also foregone growth.
Counterarguments / Defenses of the OBR
The OBR’s defenders argue that its independence and cautious approach help maintain market confidence and fiscal discipline. (CNBC)
The External Review of the OBR notes that while there is some political tension, many interviewees strongly support its factual, evidence-based commentary. (Office for Budget Responsibility)
Some argue that without such a watchdog, the government might be too prone to risky or unfunded fiscal adventures, which could damage finances and growth in the long run.
Also, adjusting forecasts downward (even if politically painful) might be necessary if past forecasts were overly optimistic; having more realistic forecasts may force more sustainable policy.
My Take / Analysis
There seems to be a real tension in the UK between maintaining fiscal credibility (through the OBR) and pursuing more aggressive growth-oriented policy (especially via public investment).
The criticisms are not just ideological: many are technical and structural (forecast models, productivity assumptions, timing). These are genuine policy design issues, not just political squabbling.
Reforming the OBR could be beneficial, but it’s tricky: weaken it too much, and you risk reckless fiscal policy; leave it too rigid, and you may stifle growth.
