I am informed that the Treasury was on tenterhooks last night, waiting for confirmation that the Queen had given the royal assent to the bill which establishes the Office of Responsibility in its final official form. I believe that the Chancellor traditionally briefs the Queen about the contents of the Budget on the day before he makes his speech, but I do not know if he went to the Palace yesterday with the bill (and a biro) in his briefcase.

No matter. The OBR is expected to act as if the bill were already passed until the royal assent is attained.

The existence of the OBR has also had another interesting effect on the Treasury’s Budget procedures. The planned Budget measure now have to be sent to the OBR a couple of weeks ahead of the big day, so that the OBR economists can opine on whether the tax and spending plans will meet the government’s medium term fiscal mandate. In the past, Chancellors have regularly left their decisions until the very last minute, with printers sweating to produce the Budget Red Book on the night before the announcements are made. Now, ministers are forced to make their decisions in good time. This leaves Treasury officials strangely unemployed in the days immediately ahead of the Budget.

What would happen if the OBR comes back and says that the Treasury measures will not be enough to hit the government’s fiscal mandate? Apparently, there might then be an “iterative process”, with the Treasury and the OBR swapping emails about the new measures which the Chancellor might be willing to introduce. Or, the Chancellor might decide that he does not like the OBR forecast, so he might produce one of his own.

None of this will happen this year, because the OBR and the Treasury seem to be broadly in sync in their thinking. But it might happen one day.

I am also told that when this has happened in other countries, the disagreement between the finance ministry and the office of budget responsibility has been followed by one certain event – a large cut in the future funding of the OBR, to make sure that it never misbehaves again.

Robert Chote, watch out.

This entry was posted by Gavyn Davies on Wednesday, March 23rd, 2011 at 9:15 and is filed under Capital markets, People. Tagged with Chancellor, george osborne, HM treasury, Queen. Edit this entry.