Rachel Reeves is pushing for the UK’s tax and spending watchdog to upgrade its national growth forecasts to reflect the economic boost Labour says can be achieved from its blitz of planning reforms.
In a development that could open up additional spending headroom for the chancellor before next month’s budget, the Treasury has held talks with the Office for Budget Responsibility to try to persuade its officials that unblocking the planning system could drive up growth.
Labour has placed the liberalisation of the planning regime in England and Wales at the centre of its efforts to kickstart Britain’s economy, with proposals to build millions of new homes and infrastructure projects.
However, the OBR has previously dismissed such changes when drawing up its economic forecasts – including in 2011, when it judged there was insufficient evidence that David Cameron’s pledge to bulldoze planning regulations would increase growth.
Sources close to the Treasury said the significance of its drive to change the independent economic forecaster’s perspective was because the OBR would most probably raise its expectations for tax revenue in tandem, reflecting the proceeds of a faster-growing economy.
This could open up extra spending firepower, or help the chancellor to meet self-imposed fiscal rules without the need for raising taxes. Successive chancellors have taken this approach, aiming to win the maximum credit for their policies.
Reeves revealed the details of her ambition at a fringe event at Labour’s annual conference in Liverpool on Tuesday, saying she was keen on “getting the OBR to score the impact of the planning reforms” before the 30 October budget.
Speaking at the event hosted by the IPPR thinktank, she said: “We want to work with the OBR on providing the evidence to show that the planning reforms can also deliver growth.”
However, she also alluded to the challenges she would face. “In the last few years, obviously I’ve followed as shadow chancellor what the OBR scores and doesn’t score. They have scored the childcare changes under the previous government, and they’ve scored immigration,” she said.
After her predecessor as chancellor, Jeremy Hunt, announced a multibillion-pound expansion in childcare support in last year’s budget, the OBR upgraded its forecasts in anticipation that the policy would increase employment by 110,000 and increase GDP by 0.2% in five years.
However, proving the benefits of planning reforms could be more difficult, after limited progress made in the past decade to increase housebuilding and construction of big projects despite the promises made by successive governments.
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The details come after Reeves was handed the OBR’s first round of pre-budget forecasts on Thursday last week, providing her with the guide rails for her tax and spending decisions in next month’s set-piece speech to the House of Commons.
Days later, the chancellor hinted in her Liverpool conference speech that the 30 October budget would include a relaxation of the government’s self-imposed fiscal rules to prioritise investment.
The Treasury is expected to be locked in a process with the OBR over the coming weeks to outline its budget measures, before a deadline for the watchdog to finalise its economic and fiscal outlook on 25 October.
A Treasury spokesperson said: “It is standard practice for HMT to discuss policies with the OBR as part of the usual budget process to understand their impact on the economy and public finances.
“All judgements underpinning both the economy and fiscal forecasts are at the discretion of the independent OBR which will publish its full forecast alongside the 30 October budget.”
