Commentary on provisions of the Act
Section 1: Announcement of fiscally significant measures
- Subsection (1) notes that this Act amends part 1 of the BRNAA, which relates to the establishment of the OBR.
- Subsection (2) amends section 4 of the BRNAA to reflect the additional duties introduced in this Act, so that section 4(2) will read: "The duty imposed by this section includes, in particular, the duties imposed on the Office by subsections (3) and (4) and section 4A".
- Subsection (3) introduces a new section 4A.
- Subsection (1) of section 4A states if a Minister of the Crown plans to make a fiscal announcement in respect of fiscally significant measures to the House of Commons, then HM Treasury must request that the OBR prepare a report under section 4(3) of the BRNAA which will assess these measures. As described in paragraph 3 above, section 4(3) of the BRNAA requires the OBR to produce fiscal and economic forecasts, including assessments of the extent to which the Government is meeting its fiscal mandate. Subsection (1) sets out the typical forecast process whereby the Chancellor commissions a forecast from the OBR to go alongside a Budget (in accordance with the Charter), or a fiscal event. The typical process is for the Chancellor to commission the OBR, at least twice per financial year, to publish forecasts of the economy and public finances.
- Subsection (2) of section 4A means that, if the OBR deems that a fiscal announcement in respect of fiscally significant measures has been made to the House of Commons, and HM Treasury did not request an economic and fiscal forecast to be published alongside the announcement, it is required to inform the Treasury Committee of its opinion, and to prepare a report including a costing that assesses the fiscal impact of each measure. The OBR may, but is not required to, prepare this report as an economic and fiscal forecast under section 4(3) of the BRNAA.
- Subsection (3) of section 4A sets out that a measure or combination of measures is "fiscally significant" if the measure, or a combination of measures, has a costing for a specified period that exceeds a specified percentage of gross domestic product for a specified period – here, "specified" means specified in, or determined in accordance with, the Charter. Measures seeking to address tax avoidance are not intended to be within the scope of section 4(A)(2) and (3), as the Charter makes it clear that this subsection does not cover measures that do not have a policy costing, which tax avoidance measures would not (paragraph 17 below explains that the Charter can set out further provision for the meanings of terms, including costing).
- Subsection (4) of section 4A provides that the need for an independent OBR assessment (in subsections (1) and (3) of section 4A) does not apply for measures that are intended to have a temporary effect and which are in response to an emergency. This subsection is intended to exclude fiscally significant measures that are required in response to economic or other large shocks, such as was the case during the COVID-19 pandemic when significant emergency spending was needed very rapidly via the furlough scheme. This exclusion recognises that it is reasonable for the Government, in response to economic or other large shocks, to act quickly outside of a fiscal event without an OBR assessment. As set out in the Charter, in an emergency, the Chancellor may commission a forecast, or request analysis, from the OBR to follow the measures that need to be announced or implemented more quickly than such analysis can be produced. It is not intended to exclude temporary measures where there has not been an emergency in the usual sense of the word, nor economic or other large shocks, such as the temporary full expensing policy for capital allowances announced in the Spring 2023 Budget.
- Subsection (5) of section 4A allows the Charter for Budget Responsibility to include further detail, definitions or explanations to clarify new section 4A. Subsection (5) may be exercised so that the Charter includes provision about the meaning of expressions used in subsection (1) to (4) but which are not defined elsewhere in section 4A or in other provisions of the BRNAA.
- Subsection (6) of section 4A requires that HM Treasury publish any updates to the Charter for Budget Responsibility at least 28 days before laying it before Parliament for approval by the House of Commons. This only applies to the provisions under new section 4A of the BRNAA.
- Subsection (7) of section 4A clarifies definitions of terms used in section 1. A "fiscal announcement" means an announcement in respect of any other matter mentioned in section 1(2)(c) of the BRNAA, i.e. the matters to be included in a Financial Statement and Budget Report prepared under section 2 of the BRNAA. A "section 4 (3) report" includes fiscal and economic forecasts and an assessment of the extent to which the fiscal mandate has been, or is likely to be, achieved.
- Subsection (8) of section 4A makes clear that it does not matter for the purposes of this section whether or not two or more measures are, or are proposed to be, announced at the same time or at different times.
- Subsection (9) of section 4A ensures that the provisions of new section 4A that refer to the Treasury Select Committee continue to operate as intended if the name of the Treasury Select Committee changes or its functions are transferred to a different Committee.
Section 2: Extent, commencement and short title
- Subsection (1) notes that the provisions extend to England, Scotland, Wales and Northern Ireland.
- Subsection (2) provides that the Treasury may commence section 1 by regulations following Royal Assent.
- Subsection (3) states that section 1 may come into force over different days.
- Subsection (4) gives the short title of the Act as the Budget Responsibility Act 2024.
