In 2010 The UK government established the Office for Budget Responsibility (OBR), a semi-autonomous body with the remit to hold the government to account for their public spending. On the surface this sounds like a good idea, surely everyone would want a government who spends public money responsibly.
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The definition of responsibility on which they work, however, is not necessarily one with which we would all agree. Responsibility, here, largely means repayment of debts and reduction of the deficit. This is a responsibility of governments to the markets, not to their citizens.
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The OBR seems to be a disciplinary mechanism for ensuring and institutionalising neo-liberal fiscal policy through acting as a guardian of spending cuts. In the short term this provides independent justification for welfare cuts as the chancellor can point to the OBR projections and assessments to back-up their policies. In the longer term it will be more difficult for future governments to implement fiscal policies which are inconsistent with the OBR’s notion of responsibility.
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The biases of the OBR’s can be seen in the composition of their staff which is largely comprised of those with backgrounds in neo-liberal economics. The majority of the OBR are:
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macro-economists that have studied at Oxford, Cambridge or both; many have experience in working for independent central banks (the Bank of England, the ECB); several have been economic advisers to Tory governments; two of the three members of the Budget Responsibility Committee have experience at the IMF (Robert Chote and Graham Parker); and many more have experience working in the financial services industry that was responsible for triggering the global economic crisis
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The rationale of the OBR is based on ‘The “Inefficient State” Fallacy’ that state spending is inherently wasteful and private investment will always be better value. This is of course a ridiculous over simplification but is nevertheless behind many of the government’s policies.
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The OBR serves to further remove the discretionary power of the economy from the government and effectively hand over management of the economy to the market. As sociologist Wolfgang Streeck shows most Western states have moved in the direction of increasingly managing their national economics in a fashion which is preferable to financial markets and undesirable for the majority of citizens.
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Historically governments have been able to call on ‘devaluation‘ of national currency in order to improve their economic position in relation to that of other nations. Such techniques are, however, now seen negatively as they are considered to amount to cheating the free market games. If devaluation of currency is illegitimate and repayment of loans non-negotiable then the only option open to governments is ‘internal devaluation’ or squeezing public services and reducing wages both of which benefit the wealthier citizens at the expense of the poorer ones (Streeck, 2014: 182).
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The policies and rules of the IMF and EU are designed to ensure ‘market justice’ (Streeck, 2014: 172) not social justice, that is they are concerned with ensuring ‘fair play’ in financial markets which means that poorer countries cannot strengthen their position through manipulating their currency. But governments are not elected by the IMF or by “the markets” they are answerable to their citizens. In theory nation states have ‘Monetary Sovereignty‘ meaning that they can control their currency and decide to devalue it or print money if they wish. Countries such as the UK, however, have given some of this power over to the European Central Bank and are increasingly having policy dictated to them by “the markets”.
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Labour’s increasing acceptance of the Conservative definition of “fiscal responsibility” is damaging to democracy. This now means that there are no major British parties with any hint of a challenge to neo-liberal, free market capitalism. We have seen what Streeck characterises as the shift from the tax state to the consolidation state. The focus of national governments has, Streeck claims, moved from tax, to debt, to consolidation (reducing debt and balancing the books). The key task of governments is to represent and care for their citizens not to reduce debt.
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Streeck, W. (2014) Buying Time: The Delayed Crisis of Democratic Capitalism. London: Verso. (If you can’t get hold of this book some of the key points are also discussed in this paper)
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