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Written evidence submitted by Richard Hughes

 

Chair of Office for Budget Responsibility

Treasury Committee Questionnaire on Proposed Reappointment

 

Strictly Confidential until published by Treasury Committee

A.  Personal / general questions

1.         Do you have any business or financial connections, or other commitments or interests, that potentially give rise to a conflict or perceived conflict of interest in carrying out your continuing duties as Chair of the OBR?

No. I am employed full time as Chair of the OBR. My financial assets are in the form of personal bank accounts (current and saving), pension entitlements (from my time working for HM Treasury, the International Monetary Fund, and the OBR), and a diversified mutual fund (invested in worldwide equities, bonds, and cash). My partner is employed by an international business services company which has no dealings with the OBR.

2.         Do you intend to serve a full term if reappointed?

Yes.

3.         Do you have, or do you intend to take on, any other work commitments in addition to your role as Chair of the OBR? How have you managed any additional work commitments during your first term?

No.

 

 

B.  OBR

4.         What will be your priorities in your second term as Chair of the OBR, if reappointed?

As discussed further below, if reappointed to the position, my priorities for my second terms as Chair of the OBR would be that the organisation continues to:

 


 

 

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5.         How will you protect your personal independence and the institutional independence of the OBR during your second term as Chair, if reappointed?

The legal framework which established the OBR, in the form of the 2011 Budget Responsibility and National Audit Act (BRNA) and Charter for Budget Responsibility, includes important provisions safeguarding the independence of the OBR and members of the Budget Responsibility Committee (BRC). This has been recognised by successive External Reviews of the OBR, including the 2020 benchmarking study by the OECD which found ‘The BRNA Act provides a strong legal underpinning for the OBR’s independence.’ 1 Notable features in this regard are the:

of BRC members on the basis of their expertise and independence;

OBR’s Oversight and Audit Committees and approve the Annual Accounts;

person or body appointed by the OBR’s Non-Executive Members; and

 

Over time, the OBR itself has put in place a further set of operating principles and practices which help safeguard its independence. These include:

 


1 https://obr.uk/about-the-obr/external-reviews/


 

 

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From a personal perspective, I have and will continue to hold myself to the highest professional standards of integrity, impartiality, and professionalism my own conduct and my leadership of the OBR. In particular, I will do this by:

 

6.         How would you judge your performance as Chair of the OBR over the last five years?

When I took over as Chair of the OBR October 2020, I was very fortunate to have inherited from my predecessor, Sir Robet Chote, an institution which had quickly established itself as an independent and trusted forecaster of the UK’s economic and fiscal prospects over its first decade in existence. Since then, my first five years as Chair of the OBR has been marked by a succession of large and novel shocks to the UK and global economy, multiple


 

 

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changes of government in the UK, and increasing public awareness of the role of OBR and interest in its work and outputs.

Throughout my five years as Chair, and with the strong support of my BRC colleagues and staff, I have endeavoured to ensure that that the OBR has consistently been:

Starting with the first of these objectives, credibility, I and my BRC colleagues have sought to maintain and enhance the OBR’s reputation for providing impartial, rigorous, and evidence-driven forecasts for the UK economy and public finances, comprehensive analysis of the risks around those projections, and rigorous assessments of long-term fiscal sustainability. To this end:


2 This analysis supplemented the annual Forecast evaluation report which provides a more in-depth assessment of the previous year’s forecasts and draws lessons for future exercises.


 

 

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tensions, energy market volatility, the fiscal impacts of public health, the pensions system, and the public sector balance sheet. They also include a regularly updated set of long-term projections of the sustainability of the public finances over the next 50 years. Helped by regular hearings by this Committee and Lord’s Economic Affairs Committee, our FRS report have garnered more Parliamentary, policymaker, media, and public attention.

On the second objective, agility, I believe that, under my leadership and that of my BRC colleagues, the OBR has repeatedly demonstrated its adaptability in the face of an array of external challenges. The work of the OBR throughout the last five years has been dominated by the need to quickly get to grips with the economic and fiscal implications of three large, novel, and global shocks: the Covid pandemic, the energy crisis sparked by Russia’s full-scale invasion of Ukraine, and the recent rise in global trade tensions.


 

 

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January 2023 Forecast evaluation report, explored the sources of this forecasting error, and set out how we planned to improve our inflation methodology in future forecasts.

On the third of these objectives, transparency, my BRC colleagues and I have continued the work of our predecessors to maintain the trust of Government, Parliament, and the public by being as open as our resources and mandate allows about how the OBR constructs its forecasts, how government policy affects those forecasts, how those forecasts perform, and the key sources of risk and uncertainty around those forecasts. In particular, we have:


 

 

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On the fourth of these objectives, responsiveness, over the course of the last five years, the OBR has looked to be more outward-facing in the conduct of its work, more relevant in the issues it considers, and more impactful in the way it communicates. To this end I and my BRC Colleagues:


3 House of Commons Treasury Committee, Fuel Duty: Fiscal forecast fiction, Eleventh Report of Session 2022–23, HC 783, 23 January 2023.


 

 

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shocks at the start of the forecast process. In March 2023, we also revised and expanded our 26-member Advisory Panel to include experts across six different aspects of our work: macroeconomics and econometrics; public sector finances and public economics; financial markets and corporate finance; energy and climate change; health and longevity; and labour market and migration.

7.         What criteria should be used to judge your performance as Chair of the OBR over the next five years, if reappointed?

I believe that the OBR will need to continue to be credible, agile, transparent, and responsive in the fulfilment of our legal obligations to Government, Parliament, and the public over the next five years. In that context, I would ask that my performance over the next five year be judged against the objective that:

 

8.         How would you judge the OBR’s performance as an organisation over the last five years?

I believe the OBR has performed well over the last five years. The organisation and its staff have consistently risen to the array of challenges that have confronted us as the Government’s official economic and fiscal forecaster. In addition to grappling with the economic and fiscal implications of successive ‘one-in-a-generation’ shocks like the pandemic, energy crisis, and ongoing trade policy tensions, staff have consistently striven to refine and improve the quality, accessibility, and usefulness of our core outputs. This includes:


 

 

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Much of this success is down to the commitment, resilience, adaptability, and expertise of OBR staff, whom it has been a privilege to lead during my tenure as Chair. OBR staff have consistently risen to every analytical and operational challenge that the organisation has confronted over the past five years. Their dedication to the mandate of the organisation and to finding new and better ways of fulfilling it has been critical to all of the above achievements. And their commitment is further reflected in consistently high levels of engagement in successive staff surveys despite the strain that has been put on the organisation over this period.

Over the last five years, the OBR has also become a more diverse organisation which welcomes people from all backgrounds and perspectives and reflects the diversity of the people we serve. Over the past five years:


 

 

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9.    What are the most significant short-term challenges to the sustainability of the UK’s public finances?

The UK’s public finances have emerged from a series of major global economic shocks in a relatively vulnerable position. At the end of 2024, the UK Government’s deficit stood at 5.7 per cent of GDP, a full percentage point higher than the advanced country average, the third highest among 29 European countries, and the fifth highest among 38 advanced economies (after France, Slovakia, the US, and Israel). At 94 per cent of GDP, UK net government debt was 15 percentage points above the advanced country average, the fourth highest in Europe, and the sixth highest among advanced economies (after France, Italy, Greece, the US, and Japan).4 And with its 10-year bond yielding around 4.5 per cent in late June 2025, the UK government faces some of the highest borrowing costs of any major advanced economy.

There are few signs that the succession of global shocks that have buffeted the UK and other advanced economies are likely to abate in the coming years. The worst effects of the pandemic and energy crisis, which drive government borrowing and inflation up to generational highs, have subsided. But rising global trade tensions, upward pressure on defence spending, and continued volatility in global sovereign bond markets mean that the risks to the fiscal outlook remain high.

Against this backdrop of the elevated risks around the medium-term economic and fiscal outlook or the uncertainty inherent in any fiscal forecast, the margin for error (or ‘headroom’) that recent Governments have set aside against their fiscal targets is very small. While the OBR’s economic and fiscal forecasting record is comparable to that of other external forecasters, the average absolute final-year revision to our pre-measures borrowing over the past ten forecasts has been £19.4 billion – or around twice the margin set aside against the Government’s objective of balancing the current budget by 2029-30.

10.    What are the most significant long-term challenges to the sustainability of the UK’s public finances?

As illustrated by our Fiscal risk and sustainability reports, over the long-term the UK’s public finances are on an unsustainable trajectory. Based on current government policy settings,

 


4 IMF, Fiscal Monitor, April 2025.


 

 

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over the next 50 years demographic and other long-term pressures on the public finances are projected to drive a growing gap between:

In this baseline projection, the most important sources of upward pressures on borrowing and debt over the next 50 years are:

 

As with any forecast, and especially one looking out 50 years, there are an array of risks around this baseline projection. In particular:

is the outlook for economy-wide productivity. Were annual productivity growth to


 

 

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remain at its post-financial crisis average of around 0.5 percent, then debt would rise above 600 per cent of GDP by the early 2070s. By contrast, were annual productivity growth to recover to is pre-financial crisis average of 2.5 per cent, and government spending to remain unchanged, then debt would fall to around 65 per cent of GDP by the early 2070s.

 

11.     How, if at all, have recent shortcomings identified in data from the Office for National Statistics (ONS) impacted the OBR’s ability to produce economic forecasts and to examine the sustainability of the UK’s public finances?

The ONS is a vital partner to the OBR, and our economic and fiscal forecasts are only as good as the quality of the outturn data on which they are based. The ONS showed commendable responsiveness, nimbleness, and creativity during the Covid pandemic to provide the OBR and the public with innovative sources of real-time information about the impact of the pandemic on economic activity. ONS staff are highly professional, and their work is at the forefront of international statistical practice in a range of areas.

However, the deterioration in the reliability and consistency of ONS statistics across a number of standard macroeconomic indicators has posed significant challenges for the preparation of our economic forecasts and wider analysis. The OBR relies upon access to timely, reliable, and consistent data on the size of the population, rates of labour force participation, rates of productivity growth, levels of business investment, volumes of international trade, and rates of inflation to make its most important economic forecasting judgements. While response rates to some key surveys have been falling across countries and errors are inevitable for any statistical agency (especially one like the ONS which endeavours to provide a large volume of timely data at a high frequency), the ONS seems to have experienced an unusually high incidence of reliability problems with key economic statistical series.

Problems with the quality of ONS data have hampered our efforts to understand, interpret, and forecast some of the most important economic developments in recent years. These include the impact of recent historically high migration flows on the size and composition of the UK labour force, the rise in health-related economic inactivity in the wake of the pandemic, the impact of changing global trading arrangements on UK trade and investment flows, and the impact of all of these on the productive potential of the UK economy.

In this context, I welcome the review commissioned by the UK Statistics Authority and Cabinet Office and led by Sir Robert Devereux of the performance and culture of the ONS. I also welcome Ed Humpherson’ s review of economic statistics and its interim report. I look forward to the final reports and recommendations of both.

12.     What other challenges, if any, does the OBR face in producing economic forecasts and examining the sustainability of the UK’s public finances?

As discussed under Question 9, the single greatest challenge the OBR has faced in producing its forecast and other analysis has been the extraordinary volatility of the UK and global economy over the past five years. Since 2020, the UK and other advanced economies have been hit by a series of novel and severe shocks with a frequency that is unprecedented in the post-war period: the pandemic, the energy crisis, and rising global


 

 

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trade tensions. Each of these shocks has required us to rapidly adapt our forecasting

models to take account of the novel aspects of these shocks.

13.     What changes, if any, could the OBR implement to enhance its ability to produce economic forecasts and to examine the sustainability of the UK’s public finances?

The OBR is committed to continuously improving the construction and content of our forecasts and other analysis to ensure the relevance and usefulness to the Government, Parliament, and the public. Our Third External Review’s findings and recommendations provide a valuable roadmap for the work of the OBR over the next five years:

 

We will be publishing a detailed implementation plan in response to the Review in the summer and will continue to do our best to match the resources and expertise we have available to meet the needs and requests of Government, Parliament, and the public.

14.     What changes to the OBR’s mandate and / or powers, if any, could enhance its ability to produce economic forecasts and to examine the sustainability of the UK’s public finances?

The OBR has a clear and well-defined mandate in 2011 Budget Responsibility and National Audit Act. And the 2024 Budget Responsibility Act helped to address what was the most important loophole in the governance of the forecast process. I do not believe that any changes to the OBR’s legal mandate or powers beyond those given to it by Parliament in these Acts and their supporting instruments are necessary or desirable.

15.  How do you monitor the effectiveness of the OBR and its analysis?

The OBR draws upon an array of tools and approaches to monitor our effectiveness:


 

 

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June 2025