The Office for Budget Responsibility (OBR) has publicly challenged Labour’s Shadow Chancellor, Rachel Reeves, following her comments regarding tax increases ahead of the recent Budget announcement. Tensions have escalated between the OBR and the Treasury, particularly after Richard Hughes, the OBR chair, resigned on March 4, 2024, amid a growing controversy surrounding leaked Budget documents.
During a session with the House of Commons Treasury Committee, remaining OBR leaders raised concerns about the Treasury’s communications strategy, particularly criticizing Reeves for attributing tax increases to a “productivity review” conducted by the OBR. They emphasized that her statements overlooked other factors that had balanced the economic forecasts, which partially mitigated the need for tax rises.
David Miles, a member of the Budget Responsibility Committee, stated that various pieces of information had circulated in the press that were not typically publicized, which he found unhelpful. He confirmed that the OBR had lodged a complaint with the Treasury regarding these leaks, underscoring the contentious atmosphere.
Miles further refuted claims disseminated by Reeves’s team, which suggested that the Chancellor had reconsidered raising income tax at the last minute due to unexpectedly positive OBR forecasts. He remarked, “There are not funds down the back of the sofa,” dismissing the notion that any significant financial windfall had suddenly appeared. He described the idea of “good news” emerging unexpectedly as a “misconception.”
While acknowledging the challenges presented in the Budget, Miles noted that the OBR’s forecasts still indicated a “very challenging” fiscal position. He pointed out that a figure of plus £4 billion in the pre-measures forecast was consistent with the sentiment that the situation remains difficult.
Despite the evident strain between the OBR and the Treasury, Miles described their relationship as one of “creative tension” rather than outright conflict. He praised the economic analysts within the Treasury, expressing hope for a smoother process in the future following the recent events.
The OBR leadership also confirmed that they had briefed Treasury officials in advance about the publication of a letter documenting the headroom in OBR forecasts, which some opposition politicians interpreted as evidence that Reeves had not accurately portrayed the fiscal situation.
In response to the allegations of misleading the public, Rachel Reeves has firmly denied any wrongdoing and received backing from Sir Keir Starmer, leader of the Labour Party. Starmer stated, “There was no misleading” and emphasized that the OBR’s productivity review was a significant factor in assessing the fiscal landscape.
On March 5, a spokesman for Downing Street refuted claims that Hughes had been pressured to resign by government ministers, reiterating the administration’s commitment to the independence of the OBR. The process to appoint a new chair for the OBR is expected to commence in the coming weeks, marking a pivotal moment for the organization as it navigates its relationship with the Treasury and the broader political landscape.
