The United Kingdom’s opposition Labour Party has pledged to enshrine in law a requirement for government tax and spending plans to undergo scrutiny by fiscal regulators, a move prompted by the fallout from former Prime Minister Liz Truss’s uncosted “mini-budget” that roiled financial markets a year ago.
Rachel Reeves, Labour’s prospective finance minister, announced, “We will establish a legal mandate that compels any government enacting significant and enduring tax and spending changes to undergo an independent assessment of their impact by the Office for Budget Responsibility (OBR).”
Reeves elaborated in the Financial Times, stating, “In situations of emergency where immediate budgetary alterations are necessary, and a forecast cannot be promptly generated, the OBR will be permitted to set a timeline for publishing its assessment.”
With a national election anticipated in 2024, Labour is positioning itself as a superior steward of the economy compared to the incumbent Conservative Party.
Following the crisis triggered by the “mini-budget” episode, during which Liz Truss refrained from an OBR review, Prime Minister Rishi Sunak succeeded Truss and has since endeavored to restore the UK’s reputation for responsible fiscal management. However, Labour maintains a significant lead over the Conservatives in opinion polls.
Reeves also outlined Labour’s intention to introduce a single budget plan by the conclusion of November each year, affording businesses and households four months to prepare for the upcoming tax year, which begins in April in the UK.
A comparable proposal was made by former Finance Minister Philip Hammond in 2017, when he declared his intention to shift the traditional spring budget to the autumn. Nonetheless, significant tax and spending announcements have continued to be made in the spring since then.
