The OBR’s formal rights and responsibilities are outlined in four documents:
The Budget Responsibility and National Audit Act sets out the overarching duty of the OBR to examine and report on the sustainability of the public finances. It also gives complete discretion to the OBR in the performance of its duties, as long as those duties are performed objectively, transparently and independently and takes into account the sitting government’s policies and not alternative policies. The Charter outlines the OBR’s independence which includes complete discretion to decide:
• The methodology underpinning the OBR’s forecasts, assessment and analyses;
• the judgements made by the OBR in producing these outputs;
• the content of the OBR’s publications; and
• the OBR’s work programme of research and additional analysis.
The OBR is a non-departmental public body, under the Budget Responsibility and National Audit Act 2011. The Act provides for the establishment of the office, and sets out its functions and broad governance structure.
The Charter for Budget Responsibility
The Charter for Budget Responsibility sets out the OBR’s remit, how it is to perform its duties, the required content of its key publications and the arrangements for determining the timing of its forecasts and other key publications. It also sets out the Government’s fiscal targets and has therefore been updated a number of times in recent years. The October 2015 update introduced the requirement for the OBR to produce a report on fiscal risks every two years and formalised the requirement to report on trends in welfare spending each year. All previous versions of the Charter are available at the bottom of this page.
The OBR’s governance and management arrangements are set out in greater detail in a Framework document drawn up by the Treasury and agreed with the OBR. This describes the purposes of the OBR, how it is accountable to Parliament and the Chancellor, its governance and structure, the responsibilities of the accounting officer, the content of the annual report, the audit arrangements, and its managements and budgeting processes. The Framework document was reviewed and amended in May 2014. The previous version is available at the bottom of this page.
Memorandum of Understanding
The Memorandum of Understanding sets out the agreed working relationship between the OBR, HM Revenue and Customs, the Department for Work and Pensions, and HM Treasury. It sets out the arrangements needed for effective working, covering each institution’s key responsibilities, coordination of the forecast process, and the process for information sharing.
The OBR uses a large-scale macroeconomic model for the production of the economic forecast. The model was originally designed and developed by the Treasury, but is now jointly maintained and developed by the Treasury and the OBR. The macroeconomic model memorandum of understanding establishes a framework for the joint governance, management and development of the macroeconomic model.
The OBR’s non-executive members commissioned Kevin Page to lead the first External review into the work of the OBR in April 2014. The Review concludes that the OBR has “laudably achieved the core duties of its mandate” and “has succeeded in reducing perceptions of bias in fiscal and economic forecasting”. It also makes recommendations on how to build upon our early successes as we approach the end of our first five years.
In June 2015, the Chancellor to the Exchequer asked Sir Dave Ramsden, Chief Economic Adviser to HM Treasury, to carry out a review of the OBR. The review, published in September 2015, reflected the findings in the External review led by Kevin Page in summer 2014 and made a number of recommendations that would strengthen our existing work and allow us to provide deeper and broader scrutiny of its management of the public finances.
Read the exchange of letters between the Chancellor to the Exchequer and Robert Chote on the Treasury Review of the OBR on our Governance and reporting page and the Treasury Select Committee hearing on the conduct and implications of the HM Treasury-led review.
Read the legislation on the Scotland, Wales and Northern Ireland page.