Sunak Names Preferred Candidate to Head U.K. Fiscal Watchdog

(Bloomberg) -- U.K. Chancellor of the Exchequer Rishi Sunak named economist Richard Hughes as his preferred candidate to head the Office for Budget Responsibility, the country's fiscal watchdog.

Hughes, a research associate at the Resolution Foundation think tank and a former acting chief economist at the Treasury, would take up the 158,762 pounds ($200,000) a year role in October, assuming his appointment is confirmed by the House of Commons Treasury Committee.

Hughes is set to take over at a critical time, with the economic blow inflicted by the coronavirus pandemic on course to add around a quarter of a trillion pounds to the budget deficit in the current fiscal year. The question for the government is whether to raise taxes or cut spending to stabilize the debt, or hope that economic growth can reduce the burden.

A Resolution paper co-authored by Hughes last month called on the government to “commit to restoring fiscal sustainability once the outbreak is over and the economy is in recovery.”

“This can be done by setting out a revised fiscal framework that commits to returning the current budget to a neutral setting, keeping the debt interest burden at manageable levels, and improving public sector net worth once the economy begins to recover,” the paper said.

The commitment could be buttressed by measures “such as a tax surcharge on higher earners who were able to continue working full time during the lockdown and recovery,” it said.

Hughes, who also advises the International Monetary Fund, would replace Robert Chote, who has served as chair since the OBR was set up by then chancellor George Osborne in 2010 to end what he saw as political interference in the budget process.

The independent watchdog produces twice-yearly forecasts for the Treasury and assesses whether the government is on course to meet its fiscal rules.

It has produced more frequent updates during the coronavirus pandemic, including estimated costings of government measures to shield the economy during the crisis. It currently expects U.K borrowing to be at least 298.4 billion pounds in the current fiscal year, compared with a pre-virus forecast of 55 billion pounds.