OBR warns Sajid Javid he risks breaking borrowing rules | Politics

The head of the Treasury spending watchdog has warned Sajid Javid that he is on track to break government borrowing rules after embarking on the biggest annual increase in spending for 15 years.

Robert Chote, the chairman of the Office for Budget Responsibility (OBR), said the chancellor had set a course for the public finances that would probably breach a Conservative manifesto pledge to deliver balanced budgets by the mid-2020s.

Answering questions from MPs on the Commons Treasury committee after Javid’s spending round statement last week, Chote said the OBR believed the government was “not obviously on course to achieve that” promise. Referring to the spending round, he added: “Any additional spending today would take you further away rather than closer to it.”

Against a backdrop of rising political chaos and as Boris Johnson pushes for a snap election, Javid set out the biggest annual rise in funds for government departments since before the financial crisis.

As part of the spending round, the chancellor said he would stick to the fiscal rules outlined in the Conservative party manifesto published by Theresa May during the 2017 election campaign.

Under the rules, national debt must fall as a percentage of GDP in 2020-21, while borrowing as a percentage of national output, adjusted for economic fluctuations, must also remain below 2% of GDP by the same year. The Tories also promised to eliminate the budget deficit – the shortfall between spending and income from taxes – by the mid-2020s.

Javid outlined the spending plans based on OBR forecasts for the economy and public finances made in March, which presumed a Brexit deal would be struck in 2019 and also came before the economy contracted unexpectedly in the second quarter.

Chote said Javid was keeping his promise to deliver the spending round within the fiscal rules, but only because the forecasts for the economy and the public finances were out of date and that the planning period was just for one year. The spending round period also meant the government would not run up against its mid-2020s promise.

He told the Treasury committee: “The government has obviously only announced one year of concrete plans and as it happens, two of the three legislated fiscal targets that they have are specifically referring to next year, so they are able to say what they have said based on our March forecasts.”

Chote downplayed concerns that Javid had avoided scrutiny by using old forecasts. “We would not have been expected to be asked to produce a forecast to accompany a one-year spending announcement,” he said.

Javid said at the spending round that the Treasury would review its fiscal rules ahead of the next budget.

Chote said the fiscal rules for the next year provided a “very limited prism” for assessing the public finances, adding: “You need to have a fuller picture around policy and spending in the future and other spending and tax decisions.”

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