Reeves did not mislead on challenges facing UK ahead of Budget, says OBR official
A senior official at Britain’s economic forecaster said he did not believe the chancellor was misleading when he said the state of the public finances was “very challenging” in the run-up to the budget.
Prof David Miles, of the Office for Budget Responsibility (OBR), told MPs that Rachel Reeves’ comments before announcing her tax and spending plans were “not inconsistent” with the situation she faced.
Reeves rejected claims that he misled the public about the country’s finances after the OBR revealed its economic forecasts were better than widely thought.
But Prof Miles said despite the forecasts the chancellor still faced “a very difficult budget and very difficult choices”.
He said the OBR had raised concerns with Treasury officials about leaks to the media in the run-up to the Budget, adding: “It was clear that we did not find that helpful. We made that clear.”
But he said the watchdog was not “at war” with the Treasury.
Political debate has erupted over the last few weeks over information being shared publicly about the health of the economy and the choices the chancellor should make.
Last week’s Budget included tax increases totaling £26bn; The £8 billion would be raised by extending the freeze on income tax and National Insurance thresholds for a further three years. The two-child benefit limit has also been removed.
In creating the budget, Reeves repeatedly mentioned that lowering the UK’s projected economic productivity would make it harder for it to comply with borrowing rules; This fueled speculation that income tax rates would be raised, which broke the manifesto’s commitment.
He made a rare pre-Budget speech in Downing Street on November 4, warning that the UK’s productivity was weaker “than previously thought” and that this also had “consequences for the public finances due to lower tax revenues”.
But it has since been revealed that the OBR, which assesses the government’s tax and spending policies, told the Treasury on October 31 that it was on track to meet the main borrowing rule by £4.2bn due to a fall in productivity offset by higher wages that boosted the government’s tax revenues.
The Conservatives claimed the chancellor was giving an overly pessimistic impression as a “smokescreen” for increasing taxes to boost welfare spending, while leader Kemi Badenoch claimed he was “lying to the public”.
The £4.2 billion buffer was less than the £9.9 billion Reeves left for himself in the previous budget, and Prof Miles told a committee of MPs it still presented a “significant” challenge for the government, which wants to increase the figure overall.
What the so-called chancellors have left to themselves (essentially a buffer to which they can fall back on) has become smaller in recent years. Before November 2022, chancellors tend to create a buffer of between £20bn and £30bn.
Questioned by MPs after the Chancellor failed to mention the extra in the forecast, Prof Miles said that although £4.2bn was a positive figure, it was “by a small margin”, adding that the OBR did not actually expect it to be interpreted as “this is very, very good news, there is no gap to be filled as people say”.
“In my view I don’t think it was misleading for the Chancellor to say at the beginning of that week that the financial situation was very challenging.
“The Chancellor was saying that this was a very difficult budget and very difficult choices had to be made. And I don’t think that was internally inconsistent with the last preliminary measure assessment that we did, which although showed a very small positive amount of so-called headroom, was very thin.”
Prof Miles added that the £4.2bn buffer would also be reduced to minus £3bn because the OBR’s forecast did not take into account government benefit and winter fuel payment U-turns.
