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A senior figure from the Office for Budget Responsibility (OBR), the UK’s economic forecasting body, has defended Chancellor Rachel Reeves over her description of the public finances as “very challenging” prior to the Budget announcement. Professor David Miles told MPs that Reeves’s remarks aligned with the economic circumstances she encountered leading up to her tax and spending plans. Although the OBR’s forecasts later showed a more positive outlook than many anticipated, Prof Miles maintained that the chancellor was still confronted with difficult decisions during the Budget process.
Prof Miles also addressed concerns regarding leaks of sensitive information before the Budget. He explained that the OBR had expressed its displeasure to Treasury officials about such leaks, clarifying that these were unhelpful. To dispel misunderstandings in the media—that the OBR was either too closely aligned with the government or that its forecasts were unreliable—the OBR released a letter outlining the schedule for its pre-Budget forecasts. Despite occasional tensions, Prof Miles emphasized that the watchdog was not “at war” with the Treasury, noting their independent yet collaborative relationship. During the Treasury Select Committee hearings, Prof Miles appeared alongside fellow official Tom Josephs. Notably absent was the former OBR chairman, Richard Hughes, who resigned following a Budget-day error that led to the early publication of forecast data.
The Budget itself, delivered last week, included a £26 billion package of tax increases. Among these measures were an extension of the freeze on income tax and National Insurance thresholds for three more years, generating £8 billion in revenue, alongside the removal of the two-child benefit cap. In the lead-up to the Budget, Reeves had warned that a downward revision of the UK’s productivity would complicate adherence to borrowing rules. This fueled speculation of potential tax increases that might conflict with Labour’s manifesto promises. On 4 November, she issued a rare pre-Budget address in Downing Street, highlighting that economic productivity was weaker than previously thought and that this would negatively impact public finances due to lower tax revenues.
However, internal communications revealed that by 31 October, the OBR had informed the Treasury that the government was still poised to meet its main borrowing target with a £4.2 billion margin. This buffer was a result of higher wages offsetting the productivity downgrade, thus supporting tax receipts. The Conservative Party criticized the chancellor, accusing her of painting an unnecessarily bleak financial picture to justify higher taxes for increased welfare spending, with leader Kemi Badenoch asserting that Reeves “lied to the public.” Prof Miles acknowledged that although the £4.2 billion headroom was positive, it was minimal and represented a significant challenge. Over recent years, this fiscal buffer had shrunk substantially; chancellors before November 2022 typically left a buffer between £20 billion and £30 billion.
When asked about the chancellor’s decision not to highlight the small surplus in her budgetary comments, Prof Miles explained that the £4.2 billion figure was too marginal to be regarded as unequivocally good news. He stated, “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.” He further noted that while others might interpret the situation differently, Reeves’s description of the need for tough choices was consistent with the OBR’s final pre-Budget assessment, which showed only a “wafer-thin” positive margin. Prof Miles also pointed out that the £4.2 billion would have been reduced to a £3 billion deficit if the OBR had factored in the government’s subsequent reversals on welfare and winter fuel payments.
Tom Josephs, another senior OBR official, also appeared before MPs and issued an apology for the premature release of the OBR’s forecast document, which revealed Budget measures ahead of the official announcement. This breach of protocol led to the resignation of Richard Hughes, who took full responsibility for what was described as the worst failure in the OBR’s 15-year history. Mr Josephs confirmed that the office would implement the recommendations from the investigation to prevent such incidents in the future
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