The UK’s financial regulator is at odds with former Conservative Chancellor Jeremy Hunt over a review into the £22bn “black hole” in the public finances that the Labour party has claimed it inherited. Chancellor Rachel Reeves is expected to raise several taxes in her Budget on Wednesday to cover the shortfall. But Hunt says that the Office for Budget Responsibility (OBR) will publish a report on Budget day that will criticise his party and support Labour’s tax rises. Richard Hughes, the head of the OBR, has defended his decision to publish the report, which is independent of the government, and told Hunt that it would not include “decisions of ministers”.
Labour is preparing for its biggest week since it was elected in July, with Reeves set to deliver the party’s first Budget in nearly 15 years. The OBR will release an additional report commissioned this year on the “adequacy of information” supplied to it by the previous Tory government. Hunt, a supporter of the OBR, consulted it to provide credibility for his own spending plans but is furious that the watchdog is planning to release its review into the assurances it was provided during his tenure in the Treasury.
Hunt is concerned that the timing of the report’s release was designed to make the case that Budget tax increases were caused by a shortfall in the spending forecasts, not communicated to the OBR at the time. Last week, Reeves said the £22bn “hole” in the public finances was one of the reasons for the tax rises and added that the OBR would be publishing its review on “how that was allowed to happen”. The Treasury regards this as an important subplot to the main Budget narrative. Hunt also attacked the OBR for not requesting his views, nor letting him see the report before publication.
The OBR responded to Hunt, stating that the review was about the institutional relationship with the Treasury, not the conduct or decisions of ministers. The OBR mentioned that after concerns about market sensitivity and advice from the Cabinet Office, it was not “necessary or appropriate” to give Hunt advanced sight of the report. The OBR collaborates closely with the Treasury, and its judgments on the soundness of the chancellors’ plans are important to financial investors and Reeves, who wishes to borrow money to invest in significant infrastructure projects.
Two years ago, former Prime Minister Liz Truss and her chancellor Kwasi Kwarteng declined an OBR forecast ahead of their mini-Budget, which created turmoil in the UK economy
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