OBR confronted Treasury about ‘unhelpful’ policy leaks before Reeves’ Budget
Britain’s economic watchdog has raised serious concerns with the Treasury over a chaotic series of leaks and briefings on the Budget ahead of Rachel Reeves’ official announcement last week.
The Office for Budget Responsibility (OBR) told the Treasury committee today that the leaks were “unhelpful”.
This follows warnings from Andy Haldane, the former chief economist of the Bank of England, to the BBC. Sunday with Laura Kuenssberg program briefings and U-turns on issues such as income tax were “a big reason for this”. [economic] “growth followed a horizontal course.”
The row comes after OBR chief Richard Hughes dramatically resigned last night following a critical report that the watchdog published Budget details 40 minutes early.
But it also emerges that Ms Reeves’ own future as chancellor is under threat over allegations that she deliberately withheld data from the OBR that revealed a spending black hole was being filled with higher-than-expected tax revenues.
According to committee member Professor David Miles, the briefings given by Ms Reeves and officials were a significant concern for the OBR.
Prof Miles told MPs on the Treasury’s select committee: “I don’t think there were any formal complaints. We were clearly aware that the information was being reported in the press.”
“There was a lot of information coming out in the press that wouldn’t normally be out there and that, from our point of view, wasn’t particularly useful,” he told the House of Commons Treasury Committee. Asked whether the OBR had raised the issue with the Treasury, he said: “It was clear that we did not find it useful. We made that clear.”
Prof Miles said Ms Reeves’ unusual pre-budget speech and press conference was not “inconsistent” with the figures given to her by the Office for Budget Responsibility (OBR).
The speech on 4 November was seen as an attempt to move towards manifesto-busting increases in income tax; The chancellor said downgrading the OBR’s productivity rating would have an impact on the public finances.
But in fact, at the time the speech was made, the OBR estimated it would stay within rules of funding day-to-day spending through tax, rather than borrowing on a “very small” margin of £4.2bn, partly due to the tax effects of high wages and inflation.
Later on November 10, Ms Reeves told the BBC that sticking to the manifesto pledge not to increase income tax rates would only be possible with “deep cuts” to public investment.
But by the end of the week, the plan to raise income tax was scrapped, with Treasury sources citing an improvement in OBR forecasts; This was a dramatic U-turn, adding to the chaos in the run-up to the Budget.
Prof Miles said: “My interpretation, and others may interpret it differently, is that the chancellor was saying this was a very difficult budget and very difficult choices had to be made.
“And I don’t think that’s internally inconsistent with the last preliminary injunction assessment we did, which was very thin even though it did show a very small positive amount of so-called headroom.”
But he insisted the OBR was “not at war” with the government.
Prof Miles said: “I cannot say that we are at war with the Treasury. In other words, we have a very close relationship with the Treasury. In fact, we rely not only on the Treasury but also on other units of the state for the analysis of many measures.”
He added: “There are a number of very good economic analysts in the Treasury, from my perspective, and we rely heavily on them.
“Hopefully in the future, we can run a process that’s a little smoother than what we’ve been through and do everything we can.”
The evidence session came on a day when the Organization for Economic Co-operation and Development (OECD) warned that economic growth prospects had fallen after Ms Reeves’ Budget, while unemployment was likely to rise.
