Business

Britain’s budget watchdog faces scrutiny over its growing influence

Criticism has been leveled at the Office for Budget Responsibility in the lead-up to this week’s Budget, with some characterizing it as restrictive to economic expansion.

The traditional image of Budget day features the chancellor of the exchequer holding up the iconic Red Box outside Number 11, containing a red book that outlines the measures to be announced in the Budget speech.

A treated image showing Rachel Reeves with shadow figures behind her

However, attention has shifted to a different publication – a detailed, chart-filled analysis of the Budget, assessing the cost of government policies, produced by a team within the Ministry of Justice building, a relatively unknown entity outside of its own circle.

Despite its relatively low profile, this department wields significant influence over economic policy.

A growing debate is underway about whether this small department, known as the Office for Budget Responsibility (OBR), has become too powerful, with some arguing that it is essentially driving government economic policy, largely manned by young intellectuals and civil servants.

Furthermore, some suggest that the OBR's chairman, Richard Hughes, a Harvard-educated former Treasury official, has become as influential as the actual chancellor.

Labour's Lou Haigh, a former cabinet minister, has described the OBR as an "unelected institution dictating the limits of government ambition", while the Trades Union Congress has accused the "unaccountable OBR" of stifling growth.

Britain's Chancellor of the Exchequer Rachel Reeves poses with the red Budget Box as she leaves 11 Downing Street — Ahead of Wednesday's Budget, is the OBR really the tail wagging the Treasury dog?

As the Budget approaches, questions arise about whether the OBR has become the dominant force in shaping Treasury policy, and if so, whether this is a consequence of Labour's own actions in altering the department's role.

In a conversation with Richard Hughes following the Spring Statement, I posed the question of whether the OBR's perceived omnipotence was justified.

His response was emphatic and tinged with a hint of frustration.

"Our powers are strictly defined by Parliament," he stated. "We are tasked with producing forecasts, scrutinizing policy costs, and assessing the chancellor's progress toward meeting fiscal rules – nothing more."

"The chancellor has the authority to choose policies, set rules, and modify them as needed," he added. "We merely provide analysis and forecasts to inform those decisions."

The OBR's official mandate is to monitor the government's spending plans and performance, releasing forecasts for the economy and public finances twice a year, which help determine whether the government is on track to meet its tax and spending targets.

Chair of the OBR, Office For Budget Responsibility, Richard Hughes, Member of the Budget Responsibility Committee, Andy King and Prof David Miles CBE, Member of the Budget Responsibility Committee arrive on Downing Street — A debate is bubbling about whether the department, known to few outside this closed world, is in fact too powerful

Ironically, the current debate surrounding the OBR's influence comes at a time when the chancellor has granted the forecaster even greater independence and authority.

The chancellor, with the consent of the Treasury Select Committee, appoints the three members of the Budget Responsibility Committee, which leads the OBR.

When Labour took office in 2024, they introduced a new law granting the OBR additional powers, including the ability to initiate forecasts without government request, prompted by the Conservatives' mini-Budget in September 2022, which sparked market concerns.

At the time, I reported that Chancellor Kwasi Kwarteng had declined the OBR's offer to provide an official forecast, which could have either reassured markets or hindered the Truss administration's policy announcements. The new law ensures that such a situation cannot recur.

The law also enables the OBR to question government assumptions about departmental spending, a capability it previously lacked, and provides direct access to Treasury data to facilitate this process.

Empowering the OBR was a deliberate move by Rachel Reeves, the Chancellor.

Former Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng — The Conservatives' mini-Budget of September 2022, which promised big tax cuts but did not say how they would be paid for, spooked financial markets

Reeves believed that granting the forecaster greater independence would enhance credibility in UK tax and spending policy, likely with the memories of the Truss-Kwarteng mini-Budget in mind.

However, by September this year, reports of Treasury frustration with the OBR had begun to circulate.

When I asked Chancellor Reeves about an OBR statement from two months prior, which noted that "promises made are constantly not kept" on tax and spending, she responded that the OBR's role is to produce forecasts, not to comment on government policy.

My conversation with Richard Hughes left a clear impression: the OBR's true power is not as extensive as its critics suggest.

Even before Labour's law change, Paul Johnson, then-director of the Institute for Fiscal Studies, cautioned against creating a "more powerful fiscal technocracy", arguing that we should be "highly cautious" about this development.

"The OBR has brought discipline and transparency to fiscal policymaking, but it is possible to have too much of a good thing," he said. "Decisions on taxation, spending, and borrowing are inherently political, not just technical questions."

"These choices are inescapably political in nature," he emphasized.

In late October, just a month before the Budget, the OBR reportedly downgraded its productivity forecast by 0.3 percentage points, a key metric influencing long-term growth prospects and Budget decisions.

According to the Institute for Fiscal Studies, a 0.1 percentage point decrease in the productivity forecast would result in a £7 billion increase in government borrowing by 2029-30, meaning a 0.3 point cut could add £21 billion to the Budget deficit.

This has significant implications for any chancellor.

For instance, if this downgrade had occurred during Jeremy Hunt's tenure as chancellor, it would have been nearly impossible for the Conservatives to implement the pre-election National Insurance cuts he introduced in March 2024.

A more significant issue is how much credit the government should receive for "pro-growth measures", such as planning reform or improved post-Brexit trade terms with Europe, which could help bridge the Budget gap.

Some on the Labour left have identified the OBR as a key structural obstacle to a government with a large majority implementing its policies decisively, a view now shared by some on the Labour right.

An activist holds a 'Time for a wealth tax' placard — Debates have been emerging long before Wednesday's Budget

Praful Nargund, director of the Good Growth Foundation, who ran against Jeremy Corbyn in the previous general election, stated: "The Office for Budget Responsibility was created to enforce austerity, but in its effort to restore credibility, it has driven us further into a cycle of spending cuts without end."

"A body designed to oversee cuts is now being asked to referee a growth strategy, which is not its intended purpose," he added.

However, Richard Hughes emphasized that the OBR is simply accounting for the numbers, and that the chancellor and Parliament hold £3 trillion worth of power to make decisions on revenue and spending.

In September 2008, amidst the global financial crisis, the Conservative Party published a pamphlet titled "Reconstruction", which would eventually give birth to the idea of the OBR.

The pamphlet was released as the British banking system teetered on the brink of collapse, with Bradford & Bingley being nationalized and Lehman Brothers having filed for bankruptcy just two weeks prior.

Although the pamphlet received little attention at the time, it reflected best practices in fiscal policy and laid the groundwork for the OBR's creation.

The OBR was first established by the coalition government in 2010 and was placed on a permanent statutory footing in March 2011.

US investment bank Lehman Brothers collapsed in 2008

Chancellor George Osborne predicted that appointing independent economists would create challenges for the coalition government.

A notable example of this was the fallout after Robert Chote, then chair of the OBR, published a chart showing spending levels at their lowest since the 1930s.

Austerity measures have drawn comparisons to George Orwell's critique of living conditions in northern England, with BBC colleague Norman Smith invoking the "road-to-Wigan-pier" analogy to describe the situation.

Former Prime Minister Liz Truss has suggested that a "deep state" contributed to the downfall of her short-lived government, citing the "economic establishment" as a force opposed to changing the status quo.

George Osborne holds Gladstone's red box as he poses for pictures outside 11 Downing Street in London — Chancellor George Osborne predicted that appointing independent economists was likely going to cause the coalition government some problems

Truss has previously noted the close relationships between various economic institutions, stating that officials often move between the Treasury, the Bank of England, the OBR, and the private sector, creating a network of like-minded individuals.

During the Johnson-Sunak era, the OBR released data showing the tax burden reaching historic highs, a finding that the government may not have welcomed.

The Labour government strengthened the OBR, and the impressive backgrounds of the Budget Responsibility Committee members have earned the organization credibility.

The committee's members, including Richard Hughes, Tom Josephs, and Prof David Miles, bring extensive experience in fiscal policy and economics, having held senior positions at the Treasury, the Bank of England, and Morgan Stanley.

Richard Hughes (left), Andy King and David Miles (right) walk along a street wearing suits — Richard Hughes (left), Andy King, who was a member of the Budget Responsibility Committee of the Office for Budget Responsibility until August 2023, and David Miles (right)

Sources indicate that changes are forthcoming in the dynamic between the OBR and the Treasury, which will alter their working relationship.

A key change is that the OBR will now only provide its "headroom" calculation once a year, coinciding with the Budget, reducing the frequency of speculation about tax increases.

This adjustment acknowledges that the current system has created a cycle of speculation about tax rises, which can have negative consequences.

While some argue that the OBR is not to blame for this situation, the International Monetary Fund recommends increasing the headroom as a way to break the cycle of speculation and mitigate its impact on consumer and business confidence.

The chancellor is expected to outline plans to increase the headroom figure in the upcoming Budget, a move that will be closely watched by markets.

The 2022 mini-Budget demonstrated the significant respect the markets have for the OBR's role, as highlighted by Bank of England governor Andrew Bailey during emergency meetings at Downing Street.

A sign outside the HM Treasury building in the Westminster area in central London, UK — By September of this year, suggestions of the Treasury's own frustration with the OBR were circulating

Even without the OBR, the government's Budget decisions would still be influenced by market reactions, as the UK relies on foreign investment to finance its debt.

The UK's debt is increasingly held by foreign entities, such as hedge funds, rather than domestic institutions like pension and insurance companies, making market sentiment a crucial factor.

Those seeking to reduce the OBR's influence will need to provide alternative means of establishing credibility, both in terms of economic data and political authority.

As other countries manage without similar institutions, a debate has emerged about the OBR's role, record, and future, going beyond the chancellor's policies and into the broader context of economic governance.

Top picture credit: Getty Images

Up Next

Connecting Tourists with Local African Hospitality

Don't Miss

Covid inquiry hears impact on firms and staff

Business

Artist Alleges AirAsia Used His Work Without Permission

A street artist from Penang has reported that one of his artworks has been replicated and featured on the design of an airplane.

A lawsuit has been filed by a Malaysian-based artist against AirAsia and its parent company, Capital A Berhad, alleging unauthorized use of the artist's designs on one of the airline's planes.

A low-resolution image of an AirAsia aircraft with artwork children cycling printed on its side. The passenger plane is pictured parked in an airport — Artist Ernest Zacharevic is sueing AirAsia over the use of a livery on one of its jets in 2024

According to the lawsuit, Ernest Zacharevic, a Lithuanian-born artist residing in Penang, claims that his 2012 street mural, Kids on Bicycle, was reproduced and displayed on an AirAsia aircraft in late 2024 without his permission.

Zacharevic states that the use of his design was unauthorized, and no licensing agreement or consent was obtained, adding that the livery was removed after he publicly expressed concerns about the matter.

The BBC has reached out to AirAsia for a statement regarding the allegations.

In an interview with the BBC on Thursday, Zacharevic recalled that he first became aware of the alleged copyright infringement in October 2024, when he discovered that an AirAsia plane was featuring a livery resembling his artwork.

With over a decade of experience in Malaysia, Zacharevic is known for his roadside murals in Penang, which have become a staple of the local art scene.

One of Zacharevic's notable works is the 2012 street mural Kids on Bicycle, created for a local festival, which features two children on a bicycle integrated into the mural, located in George Town's heritage district.

The mural has become a popular tourist attraction, with many visitors taking photos in front of the iconic artwork.

Zacharevic alleges that his work was reproduced on an AirAsia plane without his knowledge or consent, and he personally witnessed the plane in operation at an airport.

Recalling the incident, Zacharevic expressed his discomfort with the situation, which occurred in 2024.

He took to social media to address the issue, posting a photo of the plane and tagging the airline, suggesting that they needed to discuss the use of his artwork.

A photograph of a wall mural, depicting two children in white tops. The images in painted to show the children seated on a real-life bicycle. — Zacharevic painted Kids on Bicycle, a famous wall mural in Penang, in 2012

Since then, Zacharevic has engaged in discussions with the company, but they have been unable to come to a mutually agreeable resolution.

This is not the first instance of Zacharevic's work being used in connection with AirAsia, as he claims the airline has also used his artwork on a delivery bag for its food services arm.

Court documents reveal that Zacharevic had previously discussed a potential collaboration with AirAsia in 2017, where he would create art for the airline's jets and a mural in one of their offices.

According to the documents, Zacharevic had informed the airline of his work and business rates during these discussions.

The lawsuit asserts that despite being aware of Zacharevic's work and rates, the airline proceeded to reproduce and publicly display one of his notable works, thereby infringing on his copyright and moral rights.

As the largest low-cost carrier in Asia, AirAsia operates over 200 jets to more than 100 destinations, and has recently announced plans to resume flights from Kuala Lumpur to London via Bahrain.

Zacharevic has stated that he will leave it to the court to determine any potential compensation he may be entitled to.

The artist emphasized that he does not consider the use of his artwork to be a mere reference to cultural or geographical associations, but rather a distinct artistic creation.

Zacharevic stressed that his artwork is the result of years of professional training, skill, and labor, and should be recognized as such.

Business

US Businesses and Consumers Bear Brunt of Trump Tariff Costs, According to NY Fed

In 2022, the United States saw a significant increase in collective import tariff rates, with rates rising by more than 300 percent for a range of imported goods.

The modification of tariff agreements by President Donald Trump with several countries had a consistent outcome: increased costs for US-based companies and consumers.

A damp sidewalk in New York City being crossed by men and women carrying shopping bags.

According to a study released on Thursday by the Federal Reserve Bank of New York, the average tariff rate on imported goods increased significantly, rising from 2.6% at the beginning of the year to 13% in 2025.

The New York Fed's research revealed that US companies absorbed approximately 90% of the costs associated with the higher tariffs imposed by Trump on goods from countries such as Mexico, China, Canada, and the European Union.

The Federal Reserve Bank of New York stated that "the majority of the economic burden of the high tariffs imposed in 2025 continues to be borne by US firms and consumers."

When tariff rates changed and increased in the previous year, exporting countries did not adjust their prices to mitigate potential declines in US demand.

Instead of lowering prices, exporters maintained their existing prices and transferred the tariff costs to US importers, who subsequently increased the prices of these goods for consumers.

The response of exporters in 2025 was similar to their reaction in 2018, when Trump introduced certain tariffs during his first term, resulting in higher consumer prices with minimal other economic effects, as noted by the New York Fed at the time.

The New York Fed's findings on Thursday are consistent with the results of other recent analyses.

The Kiel Institute for the World Economy, a German research organization, reported last month that its research indicated "nearly complete pass-through of tariffs to US import prices."

By analyzing 25 million transactions, Kiel researchers discovered that the prices of goods from countries like Brazil and India did not decrease.

The Kiel report noted that "trade volumes declined" instead, indicating that exporters preferred to reduce the quantity of goods shipped to the US rather than lower their prices.

The National Bureau of Economic Research also found that the pass-through of tariffs to US import prices was "nearly 100%", meaning that the US bears the cost of the price increase, not the exporting countries.

Similarly, the Tax Foundation, a Washington DC-based think tank, found that the increased tariffs on goods in 2025 resulted in higher costs for American households.

The Tax Foundation considered tariffs as a new tax on consumers and estimated that the 2025 increases resulted in an average cost of $1,000 (£734.30) per household, with a projected cost of $1,300 in 2026.

The Tax Foundation reported that the "effective" tariff rate, which accounts for decreased consumer purchases due to higher prices, is now 9.9%, representing the highest average rate since 1946.

The Tax Foundation concluded that the economic benefits of tax cuts included in Trump's "Big Beautiful Bill" will be entirely offset by the impacts of the tariffs on households.

Business

BBC Reporter Exposed to Cyber Attack Due to Vulnerabilities in AI Coding Tool

The demand for vibe-coding tools, which enable individuals without coding experience to develop applications using artificial intelligence, is experiencing rapid growth.

A significant and unresolved cyber-security vulnerability has been identified in a popular AI coding platform, according to information provided to the BBC.

BBC reporter's laptop wallpaper reads "you are hacked" with an image of a robot skull — The hacker was able to hijack a BBC reporter's laptop to upload this wallpaper

The platform, known as Orchids, utilizes a "vibe-coding" approach, enabling individuals without technical expertise to create apps and games by inputting text prompts into a chatbot.

In recent months, such platforms have gained widespread popularity, often being touted as an early example of how AI can rapidly and affordably perform various professional tasks.

However, experts warn that the ease with which Orchids can be compromised highlights the risks associated with granting AI bots extensive access to computers in exchange for autonomous task execution.

Despite repeated requests for comment, the company has not responded to the BBC's inquiries.

Orchids claims to have a user base of one million and boasts partnerships with top companies, including Google, Uber, and Amazon.

According to ratings from App Bench and other analysts, Orchids is considered the top program for certain aspects of vibe coding.

Cyber-security researcher Etizaz Mohsin demonstrated the platform's security flaws to the BBC.

To test the platform's security, a spare laptop was used to download the Orchids desktop app and initiate a vibe-coding project.

A request was made to the Orchids AI assistant to generate code for a computer game based on the BBC News website.

Screenshot of the Orchids app. Shows computer code being created in an action window and folders and chat box — Orchids is one of many AI agent platforms that writes code for users who have no experience

The AI assistant automatically compiled code on the screen, which, without prior experience, was unintelligible.

By exploiting a specific cyber-security weakness, Mohsin was able to access the project and view and edit the code.

Mohsin then added a line of code to the project, which went unnoticed.

This action apparently allowed him to gain access to the computer, as evidenced by the subsequent appearance of a "Joe is hacked" notepad file on the desktop and a changed wallpaper featuring an AI hacker image.

The potential implications of this hack on the platform's numerous projects are significant.

A malicious hacker could have easily installed a virus on the machine without any action required from the victim.

Sensitive personal or financial data could have been compromised.

An attacker could have accessed internet history or even used the computer's cameras and microphones for surveillance.

Most cyber-attacks involve tricking victims into downloading malicious software or divulging login credentials.

This particular attack was carried out without any involvement from the victim, known as a zero-click attack.

Mohsin stated that the vibe-coding revolution has introduced a new class of security vulnerabilities that did not previously exist, highlighting the risks associated with relying on AI to handle tasks.

The concept of AI handling tasks autonomously comes with significant risks, according to Mohsin.

Mohsin, a 32-year-old from Pakistan currently residing in the UK, has a history of discovering dangerous software flaws, including work on the Pegasus spyware.

Etizaz Mohsin standing at the podium giving a presentation. He has black hair and wearing a brown leather jacket and jeans — Etizaz Mohsin speaking about cyber-security at the prestigious BlackHat conference

Mohsin discovered the flaw in December 2025 while experimenting with vibe-coding and has since attempted to contact Orchids through various channels, sending around a dozen messages.

The Orchids team responded to Mohsin this week, stating that they may have missed his warnings due to being overwhelmed with incoming messages.

According to the company's LinkedIn page, Orchids is a San Francisco-based company founded in 2025 with fewer than 10 employees.

Mohsin has only identified flaws in Orchids and not in other vibe-coding platforms, such as Claude Code, Cursor, Windsurf, and Lovable.

Nonetheless, experts caution that this discovery should serve as a warning.

Professor Kevin Curran of Ulster University's cybersecurity department notes that the main security implications of vibe-coding are the potential for code to fail under attack due to a lack of discipline, documentation, and review.

Agentic AI tools, which perform complex tasks with minimal human input, are increasingly gaining attention.

A recent example is the Clawbot agent, also known as Moltbot or Open Claw, which can execute tasks on a user's device with little human intervention.

The free AI agent has been downloaded by hundreds of thousands of people, granting it deep access to computers and potentially introducing numerous security risks.

Karolis Arbaciauskas, head of product at NordPass, advises caution when using such tools.

Arbaciauskas warns that while it may be intriguing to see what an AI agent can do without security measures, this level of access is also highly insecure.

He recommends running these tools on separate, dedicated machines and using disposable accounts for experimentation.

To stay informed about the latest tech stories and trends, sign up for the Tech Decoded newsletter, available outside the UK as well.

(Removed to maintain the same number of paragraphs)