March 26, 2025 - 4:00pm
Addressing the House of Commons this afternoon for her Spring Statement, Chancellor Rachel Reeves conceded that her sums for the Autumn Budget were out by £14 billion. When you are elected on a platform of competence, and little else, such an error should be fatal.
Back in October, when Keir Starmer’s government still enjoyed a healthy polling lead, Reeves raised an additional £40 billion in new taxes, with most of that coming from a hike in employers’ National Insurance contributions. That gave the Exchequer just short of £10 billion of “fiscal headroom” if growth was downgraded, or the costs of borrowing proved higher than expected. Ultimately, both happened — not only eviscerating the Government’s cushion, but leaving the Chancellor £4 billion in the red.
John Maynard Keynes once declared that the only function of economic forecasting is to make astrology look respectable. Yet even he would struggle to comprehend the ineptitude of the Office for Budget Responsibility (OBR). Nevertheless, its almost-always erroneous predictions remain gospel for decision-makers — the latest of which is a downgrading of economic growth for 2025 from 2% to 1%. Considering the country’s population is expected to grow by 1% this year, primarily as a result of immigration, anything less would mean that the UK is in a per-capita recession.
And it is just such a recession which is the background to all of this, with the OBR confirming that, as the result of a larger-than-expected labour force, productivity at the end of 2024 was 1.3% lower than documented in its October forecast. That means output per person is now 1.1% lower than five years ago. More broadly, British productivity — especially critical in a country with an ageing population — has barely moved for 17 years. Today’s announcements showed that there is little sign of that changing soon.
What’s more, Starmer’s administration appears increasingly frantic and incompetent. Earlier this month, Liz Kendall, Secretary of State for Work and Pensions, outlined cuts to the welfare budget which would give Reeves approximately £5 billion. Yet the OBR determined those changes would raise just over half that amount (allegedly £2.9 billion, to be specific). Kendall subsequently promised even more cuts, but even those took her department’s “contribution” to £3.5 billion. Public spending cuts, like the economy more generally, are in a doom loop. Meanwhile, quangos determine political reality rather than a government with a historic majority. It’s difficult to see how any of this endures in a democratic system.
Britain’s problems in 2025 remain much the same as they have been for the last 15 years: stagnant productivity, an economy centred on London, and expensive energy. In response, the Government cancelled HS2 going north of Birmingham, while signing off on a flurry of projects in the South East, from new runways at Heathrow and Gatwick to the Lower Thames Crossing. Talk of “left-behind” towns and cities, a consequence of the Brexit result, already feels like nostalgia from a distant age.
The Government position on energy, meanwhile, seems increasingly delusional. Speaking today, Reeves said that Britain would become a “defence industrial superpower” under Labour, yet such an outcome is simply impossible for a country with the most expensive industrial energy in the West.
Labour has only been in office for nine months, and the negative trends shaping Britain all date back much further. The focus should therefore shift from Reeves to the role of the OBR, which has been consistently wrong since its inception in 2010. Its purpose seems to be little more than providing cover for the government of the day, and generating material to mislead the public. How else do you explain the fact that, as new housebuilding falls to historic lows, the Government can gleefully talk of reaching its targets?
Rather than a body which scrutinises the Government, we have a quango mystifying what is going right, and more often wrong. Reeves is clearly unfit for her position. But, after today, the case to abolish the OBR has never been stronger.
Aaron Bastani is the co-founder of Novara Media, and the author of Fully Automated Luxury Communism.
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SubscribeIs it even possible to have a productive economy with high energy costs, or energy scarcity? Net zero has been the single biggest barrier to economic development in Britain and Europe IMO.
There is no mystery about what’s going on and no surprise that productivity has been declining. If you keep raising energy costs, importing large quantities of low skilled labour, increasing the numbers of people on benefits and favour hiring people on anything other than merit, this should be expected.
The OBR do no set any of these policies. They’re merely estimating the results of the policies of others (albiet not very well). Responsibility lies with those who take the decisions and not the OBR. And the OBR only insofar as their data is used to take decisions (which shouldn’t be a first order effect).
We know exactly what’s going wrong. And why. And how to fix it. Only the will is lacking. Reeves and co being forced to temporarily follow better policies isn’t going to fix things while they don’t understand or believe in the policies needed.
I’d be pointing the finger at the groupthink in government, the civil service and the media. Too easy to scapegoat the OBR. That’s just shooting the messenger.
Nevertheless, the OBR is consistently and pathetically wrong. They can’t even forecast three months ahead, let alone a year. And what happened to that report the government commissioned looking at the economic forecasting models? The models are hopeless, but has anything been done to improve them?
Great to see Aaron Bastani here writing on UnHerd.
He may be a “Marxist”, but he’s a very decent person and talks a lot of sense.( way way more than his other Novara Media colleagues Ash Sarkar (“student politics”) and Michael Walker(obsessed with Palestine)
Just shows those who avoid UnHerd because of its “Right wing bias” ( purely based on the ownership) are mistaken.
I’m with you on this. A remarkably sane piece!
I agree that Bastani seems to be a ‘reasonable’ Marxist, judging by his regular appearances on GB News as well as his writing for Unherd. But his robust criticism of a Labour government seems just a bit too much of a U-turn. Is there some other agenda going on here? Or have I become too much of a conspiracy theorist?
It’s worth noting that the potential customer base for Novarra Media is likely to be made up of more Labour-critical customers than it was while there was a conservative government
Of course there’s no growth. The WEF specifically dreamed up the Great Global Climate Catastrophe Hoax to induce degrowth for the West, through policies such as Net Zero and the subsequent massive hike in energy prices to cripple industrial development. The luxury beliefs bourgeois Lefties’ dreams are bearing fruit as the West goes to Hell in a handcart (zero emissions though!)
It’s not zero emissions. The West appears quite happy to offshore everything it needs to other countries, thereby maintaining a pretence of sanctity.
It’s hypocrisy in a handcart.
I blame QUANGOs and NGOs for most things wrong with Western ‘democracy’. Absolute scam from the top to the bottom, same as NGOs. Zero accountability, to shareholders or taxpayers, actively working against the best interests of the majority in many cases.
This is a daft thing to say, “Back in October, when Keir Starmer’s government still enjoyed a healthy polling lead…” They only got 33.7% of the vote in the July election and by October they were in the 25% range.
Followed on by, “Considering the country’s population is expected to grow by 1% this year, primarily as a result of immigration, anything less would mean that the UK is in a per-capita recession.”
Well, duh; the UK has been in a per capita recession from the combination of lowered productivity and an increase in the non-productive population.
There is no UK growth in the private sector, all of the phony “growth” comes from increased government expenditures using borrowed money.
Numbers don’t appear to be the author’s strong suit.
What an unholy mess!
Feel for my (and other) youngsters trying to plan a decent life with all the mess that has been building for a lot longer than the 15 years mentioned in the article.
We do seem to be ruled by QUANGOS and not Parliament more and more. All I can think of is that this is a brilliant way to hide ineptitude, lack of ideas and, more importantly, lack of backbone amongst the political class.
It also moves government civil servants into the quangocracy. I suspect we’ll soon hear a fanfare as a very few quangos are ended, but the quiet expansion of others in order to soften the blow for unions. They will, of course, still be paid through our taxes, but the government will claim a huge cut in direct pay to civil servants.
Traditionally, there have been three places for inept politicians to hide: EU institutions, the quangos and the House of Lords. We’ve dealt with the first, so time to deal with the second.
There are innumerable think tanks, consultancies and financial institutions that do economic forecasting. Why not just survey the field to see which one has been the most accurate over the past five years and give them the contract to do the OBR’s forecasts?
The problem with quangos generally is that they are single-issue. Hence Ofwat tells the water companies to build more reservoirs and the Environment Agency says they can’t. No minister has either the power or inclination to knock heads together and get a solution that’s in the national interest.
A TV commentator yesterday noted that most if not all economic forecasting bodies in the UK have been forecasting 1% growth for some time. Only the OBR seems to have gone for 2%. I guess that means everyone except the OBR is out of step…
Looks like the Bastani family is having a brush with reality – Sarkar says woke is over and Bastani is advocating quangocide. If only the Labour front bench had sufficient critical capability to undertake the journey. Still, we still have Darren Jones to look forward to, and if he doesn’t work out, Labour can turn to Torsten Bell, at which point aspiration can leave the room…
Maybe a bit too fast here on the quangocide. Bastani only wants the OBR abolished because it may occasionally create a break on his beloved government spending.
Following the independence of the Bank of England, it feels likely that the Treasury will become a quango now. The OBR will speak for them and they will be critiqued in the media by the IFS. That way at least the disaster of last October will not be repeated, we’ll just have a globalist consensus with interventions where necessary by the IMF/World Bank.
I never understood why the OBR was created.