Liz Truss has warned against the Government’s plans to give more powers to the Office for Budget Responsibility (OBR).
The former Conservative prime minister, who resided in No 10 for less than two months, has criticised the new Government’s Budget Responsibility Bill, due to be debated in the Commons for the first time Tuesday.
The Bill is aimed at creating what the Government has dubbed a “fiscal lock”, ensuring that any major tax or spending plans set out by ministers are subject to an assessment by the independent OBR.
This would prevent ministers from doing as Ms Truss and her then-chancellor Kwasi Kwarteng did ahead of the autumn 2022 mini-budget when they shunned an assessment by the watchdog.
Her government then announced £45 billion in unfunded tax cuts and spooked the markets, leading to soaring mortgage rates.
She has also sought to challenge the narrative that it was her short-lived tax-cutting agenda that caused the financial chaos, though a Bank of England paper she pointed to in order to support her claim was not so clear cut.
“Since 2010, the OBR – according to its own assessment – has, on average, misjudged the UK’s public sector net borrowing by £52.5 billion and miscalculated the UK’s annual growth by £46.5 billion every year.
“These are hardly rounding errors, yet its incorrect projections are used to put politicians in a straitjacket, as I discovered when attempting to boost economic growth with relatively modest tax cuts.”
Ms Truss, the former MP for South West Norfolk, was ousted at the general election by her Labour opponent Terry Jermy.
Her intervention in the new Labour Government’s agenda comes after she wrote to the head of the Civil Service demanding he investigate how “slurs” against her ended up in a briefing document for the King’s Speech.
Text describing Ms Truss’s mini-budget as a “disaster” was removed from briefing notes relating to Labour’s plans to strengthen the OBR’s hand, after she complained to the head of the Civil Service, Simon Case, that references to her were “untrue political attacks”.
She pointed to a Bank of England working paper published in May which set out longer-term risks within the financial sector that contributed to the autumn 2022 financial crisis.
Ms Truss sought to claim the paper showed the Bank “acknowledges the yield spike was not my Government’s fault”.
However, the document presented the mini-budget as an “abrupt change in the fiscal stance” which “initiated a sharp downward adjustment in Government bond prices”, amplified by existing risks.
It acknowledged these risks began “well in advance of the onset of the crisis and before the election of Liz Truss as Prime Minister”.
