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Friday, June 5, 2020 - 06:06

MNI POLICY: Hughes, Fiscal Reformer, Picked As New UK OBR Head

--Championed Adoption Of Public Sector Net Wealth As Target Measure

LONDON (MNI) - Richard Hughes, a former Director of Fiscal Policy at the Treasury and recently a leading researcher at the Resolution Foundation, has been picked to be the next head of the UK's Office for Budget Responsibility.

Subject to approval by the Treasury Select Committee, he will take over in the autumn when current OBR head Robert Chote steps down.

The appointment is seen as significant in part because Hughes has been a champion of the idea of targeting public sector net wealth rather than just focusing on debt or deficit measures as previous governments have done. This approach could well appeal to Chancellor Rishi Sunak as he faces a vast budget deficit in the wake of the Covid-19 shock.


In an MNI interview last November, Hughes said it would be better to base rules on government accounts as a whole, via a measure of public sector net wealth. While government assets do show up in whole of government accounts, there is no focus on them in higher frequency public sector finance data.

"Governments are saying we want to go out there and borrow to invest and it is going to be good for future generations, it is going to be good for taxpayers, it is all going to pay for itself. But how do you demonstrate if that proposition is actually credible? How do you hold a government to account for a proposition of that nature? You can't do it by excluding the assets and just showing the borrowing and just showing the debt," Hughes said in the MNI interview.

If the government does end up taking stakes in key industries, as currently proposed under its Operation Birch scheme, Hughes' approach would focus on the value of the stakes and the cost of borrowing to buy them, rather than looking at just the borrowing costs. Hughes has pointed out that UK public sector net worth is pretty weak by international standards, with assets outweighed by liabilities.

He has argued for a rule to increase public sector net worth as a percentage of GDP by 2024-25 to force the government to concentrate more on the value of its investments.


There are, however, pitfalls to such an approach with Charles Bean, head of OBR forecasting and a former BOE deputy governor, warning that it could provide false comfort and incentivise short-term borrowing in assets which prove to hard to value and hard to sell in any downturn.

--MNI London Bureau; tel: +44 203-586-2223; email:
--MNI London Bureau; tel: +44 203-586-2225; email:

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