Even before his official start date, Jonathan Haskel is delivering a stark warning to the UK government.
Jonathan Haskel, previously a member of the Bank of England's Monetary Policy Committee and now the government's pick to head the Office for Budget Responsibility, stated before parliamentarians that the UK has "little capacity for expansionary fiscal policy" since additional spending would conflict with reducing current inflationary forces.
He appeared before Parliament's cross-party Treasury Committee this week, which must confirm his appointment. The OBR provides independent economic forecasts and assesses the government's fiscal plans against its own targets. Its chair is a key figure in shaping public debate around tax and spending decisions, making Haskel's nomination particularly consequential ahead of the autumn budget.
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He argued that pursuing growth through borrowing to fund additional expenditure would simply push inflation higher. He warned that adding public money into the economy at a time of such pressures might make inflation more persistent.
Those pressures are real. The main driver is higher oil and gas prices linked to the conflict in the Middle East.
In a separate written statement, he noted that he forecasts interest rates increasing to address the price pressures stemming from elevated oil and gas costs. "I regard this as a risk of embedding inflation somewhat into the UK economy, necessitating more of a rise in interest rates than had been expected," Haskel wrote. He also said his own forecast is for "somewhat higher interest rates and weaker GDP growth than most are expecting."
That combination - higher rates plus slower growth - is the kind of pressure that often forces a government to make hard choices. A combination of slower economic expansion and elevated inflation could deteriorate the public finances, necessitating either tax increases or reductions in government expenditure. Haskel will be the one producing the official economic forecasts for the next prime minister's first budget this autumn.
And that next prime minister is Andy Burnham, who is due to take over from Keir Starmer next Monday. Burnham will inherit an economy with little room to maneuver, according to the person who will soon be scoring every move he makes.
Not everything Haskel said was grim. He told lawmakers he is "optimistic about AI boosting UK productivity growth." Higher productivity means the economy can grow faster without triggering inflation, and if AI delivers, it could offset some pressures. However, optimism about a technology that may take years to fully show up does not solve the immediate problem. The UK's inflation is already above target and headed higher.
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