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OBR backs chancellor over Budget claims
A senior official at the UK's fiscal watchdog has dismissed accusations that Chancellor Rachel Reeves misled the public about the state of the public finances ahead of last week's Budget.
Reeves' statements 'not inconsistent' with fiscal reality
Professor David Miles, a member of the Office for Budget Responsibility (OBR), told MPs that Reeves' description of the public finances as "very challenging" was accurate, despite later forecasts showing a small surplus. The OBR, which independently assesses government economic plans, found that the Treasury had £4.2bn more in headroom than initially expected due to higher-than-anticipated tax revenues.
"I don't think it was misleading for the chancellor to say the fiscal position was very challenging," Miles told the Treasury Select Committee. "This was a very difficult Budget with very difficult choices."
OBR raises concerns over pre-Budget leaks
Miles also revealed that the OBR had expressed frustration with Treasury officials over leaks to the media before the Budget. "We made it clear we didn't find this helpful," he said. The watchdog had previously released a letter correcting media reports that suggested the OBR was either too aligned with the government or that its forecasts were unreliable.
Despite tensions, Miles insisted the OBR was not "at war" with the Treasury, though he acknowledged the relationship was under strain following a major error on Budget day.
Resignation follows Budget day blunder
The OBR's former chairman, Richard Hughes, resigned on Monday after an investigation found the watchdog had prematurely published its official forecast, confirming key Budget measures before Reeves' speech. Tom Josephs, another OBR official, apologized to MPs for the mistake, calling it the worst failure in the organization's 15-year history.
Political row over economic narrative
The controversy centers on Reeves' repeated warnings about a productivity downgrade, which she said would make it harder to meet borrowing rules. However, the OBR later revealed that the downgrade was offset by higher wages, boosting tax receipts by £4.2bn-though Reeves did not mention this in her pre-Budget speech on 4 November.
Conservative leader Kemi Badenoch accused Reeves of using "pessimism as a smokescreen" to justify tax rises, including an £8bn extension of the freeze on income tax and National Insurance thresholds. The Budget also scrapped the two-child benefit cap, adding to welfare spending.
"The £4.2bn buffer was wafer-thin and still posed a significant challenge," Miles said. "It wasn't a signal that there was no hole to fill."
Headroom shrinks amid fiscal pressures
The £4.2bn surplus was less than half the £9.9bn Reeves had left herself in the previous Budget. Miles noted that chancellors historically aimed for buffers of £20bn-£30bn, but recent years have seen tighter margins. The OBR's forecast also did not account for the government's U-turns on welfare and winter fuel payments, which would have reduced the headroom to minus £3bn.
