OBR official says Reeves was not deceptive about challenges facing UK before Budget

A senior figure from the UK's official budget watchdog has stated that he does not believe the chancellor was being deceptive when describing the nation's public finances as "very challenging" prior to the Budget announcement. Professor David Miles of the Office for Budget Responsibility (OBR) told MPs that Rachel Reeves's remarks regarding her forthcoming tax and spending plans were "not inconsistent" with the circumstances she faced.

Reeves has dismissed accusations of misleading the public after OBR forecasts suggested the financial situation was better than initially expected. Nonetheless, Prof Miles emphasized that the chancellor still confronted a "very difficult Budget and very difficult choices." He noted that the OBR had raised concerns with Treasury officials about media leaks ahead of the Budget, commenting: "I think it was clear that we didn't find this helpful. We made that clear." He also clarified that the watchdog was not in conflict with the Treasury.

The discussion comes amid a political dispute over what information about the economy and the chancellors options was shared publicly in recent weeks. Last weeks Budget introduced 26bn in tax increases, including 8bn from extending the freeze on income tax and National Insurance thresholds for another three years, and the two-child benefit cap was removed.

Leading up to the Budget, Reeves frequently mentioned a downgrade in predicted UK productivity, which she warned would make it difficult to adhere to borrowing rules. This sparked speculation that income tax rates might rise, potentially breaking a manifesto pledge. On 4 November, she delivered a rare pre-Budget address at Downing Street, stating that productivity was lower "than previously thought," with "consequences for the public finances, including reduced tax receipts."

It later emerged that the OBR had informed the Treasury on 31 October that the government was still on track to meet its main borrowing target by 4.2bn, as higher wages would offset the productivity downgrade, boosting tax receipts. Critics from the Conservative Party argued that the chancellor had painted an unnecessarily bleak picture to justify raising taxes for increased welfare spending, with party leader Kemi Badenoch claiming she "lied to the public."

The 4.2bn buffer was smaller than the 9.9bn left at the previous Budget. Prof Miles told MPs that it still "posed a significant" challenge for the government, which aimed to increase the margin. Historically, chancellors had left a buffer of 20bn-30bn before November 2022. When questioned about the chancellor not highlighting the surplus, Prof Miles explained that the 4.2bn, while positive, was "by a tiny margin," and the OBR did not intend for it to be interpreted as "this is very, very good news, there is no hole to fill."

He added: "I don't think it was misleading, for my own view, for the chancellor to say that the fiscal position was very challenging at the beginning of that week. The chancellor was saying that this was a very difficult Budget and very difficult choices needed to be made. And I don't think that that was in itself inconsistent with the final pre-measures assessment we'd made, which, although it showed a very small positive amount of so-called headroom, it was wafer thin." Prof Miles also noted that the 4.2bn buffer would have been reduced to minus 3bn if the OBR's forecast had included the welfare and winter fuel payment reversals made by the government.

Author: Sophia Brooks