MNI BRIEF: New Powers For UK Fiscal Body As Spending Overshot

MNI (LONDON) - The Office for Budget Responsibility has been handed new powers to allow it to probe public sector spending pressures as part of the reform of the UK fiscal framework announced Monday by UK Chancellor of the Exchequer Rachel Reeves, as her parliamentary statement claiming a projected GBP21.9 billion in departmental spending for the current 2024-25 fiscal year.

OBR head Richard Hughes said that if a significant fraction of the spending pressures were realized in higher departmental spending it would be one of the largest year ahead overspends outside of the Covid pandemic adding that the OBR would review the adequacy of the powers Reeves is giving it. The most recent departmental spending review, back in 2021, was predicated on public sector pay rises around the inflation target of 2% and the much higher pay increases of 5.5% for health workers and teachers will have to be factored into the new Budget arithmetic which will be unveiled on Oct 30.

Reeves said she was changing the Budget Charter to require the Treasury to provide the OBR with an assessment of aggregate pressures against departmental expenditure limits for the current and following financial years along with a commitment to a spending review every two years. (See MNI INTERVIEW: UK Fiscal Headroom Only Clear After Spending Review)