Is Nigel Farage right about the OBR?

This article was first published in CapX.

Nigel Farage began 2026 with his usual rhetorical flair, suggesting that Britain might be better off without the Office for Budget Responsibility. Cue the accusations of fiscal irresponsibility. 

These reactions ignore the fundamental question Farage raises: what has the OBR actually achieved, and does it deserve the weight of authority it now exercises? 

If we consider the OBR’s stated mandate upon its founding by the Tory-Lib Dem coalition government 15 years ago – to provide independent, accurate economic forecasts which constrain a chancellor’s tendency to be over-optimistic – then the answer to that question is a resounding ‘no’. Stating this fact deserves credit, not reprimand. 

Offering a critical appraisal of the economy in order to curb the Treasury’s habit of presenting its forecasts too favourably is a sensible thing to do, theoretically. In practice, however, the OBR has a poor record. As the campaign group Conservative Way Forward shows, the OBR’s cumulative errors between 2010 to 2024 exceeded £500 billion in growth forecasts and £600 billion in public sector net borrowing. By overestimating productivity growth, the body’s projections have led to an underestimation of borrowing needs and fiscal gaps. This systemic optimism in forecasts – distinct from policy decisions made by the Chancellor – does not simply amount to rounding errors, but is a sign that the organisation has failed in its primary objective. Any private forecaster with such errors would have its reputation in tatters, and rightfully so.

As Henry Hill has observed, this isn’t just technical incompetence, but a refusal to admit mistakes. This is revealed in the OBR’s productivity forecasts. For over a decade, the body has insisted that Britain will soon return to its pre-financial crisis annual productivity growth of 2%, but this has never materialised. Instead of acknowledging this error and rethinking its assumption, the OBR has doubled down, continually shifting the goal posts ever so slightly further into the future.

Another problem is the steady transformation of the OBR’s function from advisory body into the arbiter par excellence of fiscal policy, whose verdict must be treated as dogma. Farage notes that the OBR’s power is such that it constrains elected politicians’ room for manoeuvre. One only need reflect on the fiasco of the Autumn Budget build-up last year to see this.

It is a bizarre system in which chancellors are beholden to five-year forecasts that are often wrong, meaning democratic accountability is subordinated to unreliable technocratic projections. This is the crux of Farage’s observation. This system – by nature – distorts democratic governance.

Rather than defending choices to the public as the government is supposed to do, policies are judged by whether they have the imprimatur of the OBR. Given that these OBR forecasts tend to prevent radical policy responses to adverse economic events, critics are right to be sceptical of their efficacy. 

Such scepticism has not been received well by some in the financial world, however. We’re warned that abolishing the OBR would take Britain back to the dark days of overcooked Treasury budgets. But this objection fails to understand how fiscal credibility works. As Farage said, ‘the ultimate forecaster is called the bond market’. No amount of blessing from the OBR would prevent market discipline when investors lose confidence in a country’s fiscal trajectory. Investors will always make their judgements based on important economic indicators such as debt levels, growth prospects, political coherence and whether the government of the day understands the consequences of its fiscal policies.

Britain managed fairly well without the OBR and has enjoyed seasons of greater fiscal discipline than we see today. From William Gladstone to Nigel Lawson, fiscal discipline was upheld through parliamentary scrutiny and market pressure, rather than a delegation of unreliable, unelected technocrats. This does not mean that abolishing the OBR would be straightforward, or that macroprudential oversight is unnecessary. Rather, we ought to ask how oversight ought to be used and who should have the power to exercise it.

One alternative could involve reverting forecasting responsibilities to the Treasury, with the Treasury Select Committee providing parliamentary scrutiny. Alongside real-time market indicators, such as bond yields, we may have a more accurate indicator of the efficacy of fiscal policies in a way the OBR cannot achieve. A different approach could maintain an independent forecasting body without any quasi-constitutional role, with their forecasts considered as inputs to judgement rather than binding constraints. This approach is popular across the world, with countries like Switzerland and New Zealand using it to great effect.

We cannot continue to pretend that the government can outsource fiscal responsibility. The over-reliance on the OBR by successive administrations has given a false comfort that independent forecasts can provide certainty in an uncertain world. As a result, chancellors have indulged in this delusion in order to avoid making difficult choices, justifying their policies as fitting with OBR forecasts.

Nigel Farage’s proposal deserves serious debate rather than dismissal. Despite its aura of authority, the OBR has failed to deliver the accuracy or accountability promised. Questioning its role is not reckless, but long overdue.