Labour pledges more power for OBR to prevent repeat of Liz Truss’s ‘disastrous’ mini-budget
Labour has pledged to bolster the power of the UK’s economic watchdog to prevent a repeat of the “disastrous mistakes” of Liz Truss’s mini-budget.
Labour leader Sir Keir Starmer has vowed to introduce legislation that would allow the Office for Budget Responsibility (OBR) to independently publish their own impact assessment of any major and permanent tax and spending changes.
His shadow chancellor, Rachel Reeves, said it meant that “never again” can the “disastrous mistakes” of the former prime minister be repeated, ahead of the first anniversary of her “fiscal event”.
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The mini-budget last September spooked the markets and sparked a huge economic fallout, pushing up government borrowing costs and putting certain pension funds on the brink of collapse.
One of the reasons for the markets’ reaction was that Ms Truss and her chancellor, Kwasi Kwarteng, refused to publish the OBR’s independent forecasts for the public finances alongside the plans.
The party said under its plans, ministers would be forced to open their books to the forecasters – though any government wanting to disregard them could seek to reverse the legislation.
It said families and businesses are “still paying the price” for her “crashing the economy” – with households coming off fixed rate mortgages paying an average of £220 more a month and inflation forecast to be the highest in the G7.
They have billed their proposal as a “fiscal lock” which would ensure fiscal stability by:
- Amending the legal framework governing the OBR to guarantee that where a fiscal event makes permanent tax and spending changes over a certain threshold, the fiscal watchdog can independently publish a forecast of the impact
- Setting out the threshold in a revised charter of budget responsibility, that would be voted on in Parliament
- Ensuring that in the event of an emergency where changes must be introduced at speed and a forecast cannot be produced in time, the OBR would be allowed to set a date for when it can publish its forecast
- Setting out a fixed timetable for budgets that would say major fiscal decisions are announced by the end of November each year, allowing businesses and families four months to prepare for the new tax year and avoiding major changes to policy at the last minute
- Annual autumn budgets would be followed by a spring update in early March providing an updated forecast and minor policy changes
James Murray, Labour’s shadow financial secretary to the Treasury, told Sky News this morning it was “absolutely crucial to legislate because we all remember what happened a year ago”.
He accused the Tories of having “set the economy on fire” with the mini-budget that “sidelined the OBR”.
“Never again should a prime minister and a chancellor be able to play fast and loose with public finances and damage the economy and household budgets in the way they have,” he added.
Speaking ahead of a visit with the Labour leader to the London Stock Exchange on Friday, the shadow chancellor said: “The economic damage done by the Conservatives’ mini-budget was nothing short of disastrous and Britain is still paying the price, with higher mortgages, higher energy bills and higher prices in the shops.
“As chancellor, my mission will be to bring stability back to our economy because that is the only way we can bring growth back. Never again can a prime minister or chancellor be allowed to repeat the disastrous mistakes of last year’s mini-budget.
“Labour will introduce a new fiscal lock to strengthen the UK’s financial stability to prevent the turmoil we witnessed this time last year. Labour will ensure stability returns to our economy and on that rock of stability working people will be better off.”
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Truss ‘tried to fatten and slaughter the pig’
Labour has been seeking to pitch itself as fiscally prudent, prioritising stabilising the economy over big spending commitments in a move that has angered some unions and those on the left.
They have sought to weaponise the anniversary of the Truss mini-budget to hammer home their message of fiscal responsibility, while highlighting the government’s record on the economy.
Ms Truss’ £45bn package of unfunded tax cuts, which she admitted would primarily have benefited the wealthy, sent the pound tumbling, interest rates soaring and culminated with the Bank of England having to intervene to prevent pension markets from collapsing.
Although she rowed back on her measures and sacked her chancellor, Kwasi Kwarteng, it was not enough to save her administration from collapsing and she resigned after just 49 days in the job – making her the shortest serving prime minister in British history.
She is still facing criticism over her actions, with the former Bank of England governor Mark Carney this week accusing her of turning Britain into “Argentina on the Channel” instead of “Singapore on the Thames”.
But Ms Truss has remained unrepentant, blaming “institutional bureaucracy” for her downfall.
The first three railway companies to be nationalised have been named as part of the new Labour government’s plan to bring rail into public ownership.
In May the service from London’s Waterloo station to southwest London, South Western Railway, will become the first to be nationalised, the Department for Transport said.
It will be followed by the London to Essex route c2c in July and east coast operator Greater Anglia in autumn, the department said.
Taking the businesses out of private ownership will reduce delays and cancellations that have plagued rail services across Britain, the government said, in turn encouraging more people to take the train.
It hopes £150m will be saved by passenger fares going to services rather than company shareholders.
Money blog: Market town with average house price of £440k named happiest place to live
The pledge was a key point of differentiation between Labour and the Conservatives during the election campaign.
Services are currently contracted out, meaning companies such as Italy’s primary operator Trenitalia bid to run services.
Under the new system, taxpayers will not have to compensate firms for terminating their contracts.
Eventually, all companies will come under the auspices of a new state-owned company called Great British Railways.
This rail nationalisation process is expected to be completed over the next three years, according to the Department for Transport.
Of 14 train operating companies to be taken over by the government, four are already under state control having been put under special administration for poor services.
Not all train services will become public with services such as the Heathrow, Stansted and Gatwick Expresses remaining in private hands.
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In total, there are 28 British rail operators.
Transport Secretary Heidi Alexander told Sky News privatisation has not worked due to “huge fragmentation” under the system with a “dizzying array of private companies”.
“Financial incentives are misaligned, and there’s no real overarching direction. And so I think as a result of that, no one’s in control,” she added.
When asked, she did not say rail fares would come down under nationalisation.
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‘Admirable’ for Haigh to resign
It’s Ms Alexander’s fourth day on the job after the shock resignation of former transport secretary Louise Haigh.
She resigned after Sky News revealed she pleaded guilty to an offence related to incorrectly telling police that a work mobile phone was stolen in 2013.
Woodbridge is the place to be for residents wanting to live the happiest life, according to new research.
The market town in Suffolk topped Rightmove’s annual list of the happiest places to live in Britain for the first time after knocking London’s Richmond upon Thames off the top spot.
Residents of Woodbridge gave high scores for feeling that they are able to be themselves in the area, the community spirit and friendliness of the people, and access to essential services such as doctors or schools.
Richmond upon Thames came in second, while Hexham, in Northumberland, nabbed third.
Woodbridge mayor councillor Robin Sanders said: “The happy mood of residents is a reflection of the vibrant town centre.”
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More than 35,000 people across Britain completed the Rightmove study, with residents asked questions such as how proud they feel about where they live, their sense of belonging, public transport and whether they earn enough to live comfortably.
Richmond Thames riverfront. Pic: iStock
According to the property portal, Monmouth is the happiest place to live in Wales, while Stirling was top in Scotland.
Feeling proud to live in an area was the main factor in overall satisfaction, Rightmove said, while living near family and friends was the smallest driver.
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