Office for Budget Responsibility: What is the OBR and why does it matter?
Office for Budget Responsibility: What is the OBR and why does it matter?
(about 1 month later)
An official forecast of how the UK economy is expected to perform will be published on 31 October, the government says.
Long-awaited forecasts for the UK economy will be published on Thursday.
It has been under pressure to release an Office for Budget Responsibility (OBR) assessment since last month's mini-budget, which was followed by a fall in the value of the pound and an increase in borrowing costs.
They will be released by the Office for Budget Responsibility (OBR), as the government sets out plans for tens of billions of pounds worth of spending cuts and tax rises.
What is the OBR?
What is the OBR and what does it do?
The OBR is independent of the government and examines the impact of Budget decisions. Budgets are held when the government announces which taxes it wants to raise or lower and how it intends to spend public money.
The OBR checks the health of the UK's economy. It is independent of the government.
The OBR's job includes setting out economic forecasts - calculations of the most likely thing that will happen in the future, given all the facts available.
Its forecasts are usually released alongside big government announcements called the Budget and Autumn Statement.
These forecasts set out the cost and impact of new policies, how much tax will be raised and what it means for borrowing and growth.
When is the Autumn Statement and how will it affect me?
Why is the OBR in the news?
Can Hunt's Budget defuse a financial timebomb?
OBR forecasts were not published alongside the mini-budget on 23 September, and the government was accused of avoiding scrutiny of its plans, which included cutting taxes by £43bn.
Before the announcements, the government gives the OBR details of its plans to raise or lower taxes and how it intends to spend public money.
After the statement, the value of the pound fell, the cost of government borrowing went up and the Bank of England was forced to step in to protect pension funds.
The OBR checks the plans and makes economic forecasts covering the next five years.
Critics - including MPs on the Treasury Select Committee - suggested the lack of forecasts had contributed to this reaction by affecting confidence in the UK economy, and called for them to be published.
These forecasts cover things like whether the government will spend more money than it raises, and whether the UK's economy will grow or get smaller.
Former Bank of England governor Mark Carney accused the government of "undercutting" the UK's key economic institutions by not publishing the OBR forecast.
Why has the OBR been in the news?
Kwarteng brings forward debt plan to calm markets
The absence of OBR advice when the government announced huge tax cuts in September's mini-Budget was strongly criticised.
Where does the government borrow billions from?
Afterwards, the value of the pound fell, the cost of government borrowing went up and the Bank of England was forced to step in to protect pension funds.
Why did the pound tumble?
Critics suggested the lack of forecasts had affected confidence in the UK economy and called for them to be published. The OBR had offered to prepare a draft forecast, but the government did not take it up.
Why were forecasts not published alongside the mini-budget?
Jeremy Hunt, who replaced Kwasi Kwarteng as chancellor after the mini-budget, says it was a mistake by the government to "fly blind".
The OBR normally publishes its own forecasts alongside government Budgets.
He pushed back the date of his autumn statement to allow time for more accurate economic forecasts.
It had offered to prepare a draft forecast in time for the mini-budget, but the government did not take it up.
Most of the tax cuts promised in the mini-budget have now been cancelled.
The Treasury defended this decision, saying it had acted at "immense speed" to offer support for households. It added it remained committed to the OBR publishing official forecasts twice a year.
Why do OBR forecasts matter?
Instead, in the aftermath of the mini-budget, the government asked the OBR to produce a forecast for 23 November.
The OBR uses its forecasts to assess whether it thinks the government is likely to meet the rules it has set for managing the economy.
The government initially resisted calls to publish it sooner - but now says the forecasts will be brought forward and published on 31 October - alongside the government's plan to pay for the measures and reduce debt.
Spending cuts of about £35bn and plans to raise £20bn in tax over the coming years are expected in the autumn statement.
Why does the OBR matter?
The OBR's judgement on whether the government's plans are sound is important for investors' confidence in the UK economy.
The government can request forecasts from the OBR at any time to get independent advice on big policy announcements.
This means some of the government's borrowing costs depend on what markets make of the OBR's forecasts.
These forecasts are important because a strong one gives investors confidence to put money into the UK economy - whereas a weak one is likely to have the opposite effect.
Why was the OBR created?The OBR was set up in 2010 under the Conservative/Liberal Democrat Coalition government.
Making the economy grow - which is when the value of all the goods and services produced by the UK increases - is one of Prime Minister Liz Truss's main priorities. So the OBR's forecasts on growth are likely to be closely-watched.
Previously, the government produced its own economic forecasts.
Bringing forward the OBR's assessment of the mini-budget could also result in a smaller interest rates rise, if markets react positively, says Mel Stride, the MP who chairs the Treasury Select Committee.
The OBR was intended to result in independent analysis of the UK economy that could not be influenced by politics.
This is because it will now be published - alongside the government's debt plan - before the Bank of England announces its next interest rate decision in early November.
Who is in charge of the OBR?The OBR is led by a Budget Responsibility Committee. It has three members, including the current OBR chairman Richard Hughes.
The committee is responsible for the OBR's forecasts and its other main responsibilities.
