THE head of Britain’s fiscal watchdog raised more concerns over the government’s spending plans today, warning “we don’t know” how they will add up.
Amid a lack of detail from last week’s Budget, Office for Budget Responsibility (OBR) chairman Richard Hughes told MPs at the Treasury select committee that there is longer-term information about tax, but spending information runs out next year.
He said that it is difficult for the OBR to accurately forecast the outlook for public finances as a result.
When asked whether outlook for public spending remained a “work of fiction,” as he described November’s Autumn Statement, Mr Hughes said: “It’s still lacking in detail, and difficult for us as forecasters to forecast, difficult for people to understand where the public finances are going, and it poses risks.
“There continues to be an imbalance between how much detail we have of the government’s tax plans — which support their objective of getting debt falling in five years time — and the amount of detail we have about its plans for departmental spending, which makes up 40 per cent of total public spending.”
The forecaster said proposed tax cuts would be partly financed by some reductions to spending as well as a fall in fiscal headroom, the state’s buffer to meet fiscal rules, from about £13 billion to £8.9bn.
But he stressed that the Budget “only just” met government fiscal targets to get debt to start to fall as a share of gross domestic product within five years and still faces “significant risks.”
The OBR said the fiscal headroom would be halved if the government ultimately freezes fuel duty, as it has done every year for the past decade, and would be wiped out if the government meets a commitment to increase defence spending to 2.5 per cent of GDP.
The forecaster said this could be offset by spending cuts, but that it does not yet know where these might be made.
Mr Hughes said: “They have a workforce plan for the NHS, they have commitment to grow defence spending in line with GDP, they have commitments to grow overseas aid spending in line with GDP.
“They have ambitions in some areas to go even further.
“How they make that add up with the rest of Whitehall departments, we don’t know.”
The Budget confirmed plans for a 2p reduction in National Insurance ahead of this year’s general election.
