Treasury should have told us about £9.5bn overspend by law – OBR

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The UK’s Office for Budget Responsibility (OBR) has said that the Treasury should have shared information about a £9.5bn overspend in the run up to the Spring 2015 Budget with the watchdog and parliament “under the law”. The OBR has already claimed that the last government did not disclose relevant information ahead of the last Budget. The matter will now be investigated by the parliamentary Public Accounts Committee after Richard Hughes, chair of the OBR, told MPs that the Treasury should explain the omission. Hughes went so far as to suggest that the Treasury “may have broken the law”.

According to Mr Hughes, if all information had been provided, the OBR’s judgement on the Treasury’s forecasts would have been “materially different”. OBR’s verdicts are keenly awaited by the finance industry and other investors who use them as a guide to the credibility of the UK’s fiscal plans. The OBR’s role is to scrutinise the government’s tax and spending plans and to provide reports on their soundness. Shadow Chancellor Hunt has accused the OBR of political partiality in the past.

Meanwhile, the OBR has also warned this week that workers rather than employers will bear the brunt of the recent increase in employer national insurance contributions announced in last week’s Budget. Chancellor Rachel Reeves revealed that employers would pay 15% NI on salaries over £5,000 from next April, instead of the previous 13.8% on salaries above £9,100. OBR calculations have indicated that three-quarters of the impact will be felt by employees, with employers reacting by raising pay less frequently and being less prepared to hire. The impact will disproportionally fall on low-paid workers, since some pay rises will be absorbed by the higher NI payments

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