OBR official clarifies that Reeves’ pre-Budget comments about economic challenges were not misleading

A senior official from the Office for Budget Responsibility (OBR) has defended Chancellor Rachel Reeves against accusations that she misled the public about the state of the UK’s finances in the lead-up to her Budget. Prof David Miles, a key figure at the OBR, told MPs that he did not believe Reeves’ comments about the economic challenges facing the country were misleading, despite concerns raised by critics and a political row surrounding the issue.

Reeves had repeatedly warned ahead of the Budget that the UK’s financial situation was “very challenging,” which some saw as a signal that the country was on the brink of major economic trouble. However, as the OBR’s official economic forecasts were released, it became clear that the situation was not as dire as previously suggested, with the forecasts showing a slight positive outlook for the government’s finances. In fact, the OBR had previously informed the Treasury that the UK was on course to meet its borrowing rules with a £4.2bn surplus, largely due to higher wages, which led to increased tax receipts.

Despite this, Reeves had painted a picture of a more dire financial outlook, leading some critics, including members of the Conservative Party, to accuse her of creating a false impression to justify her £26bn tax hikes. The accusation of deception has stirred a political storm, with Conservative leader Kemi Badenoch accusing the Chancellor of using a “smokescreen” to raise taxes in order to fund welfare spending, despite Labour’s manifesto pledge not to increase income tax or National Insurance rates.

However, Prof Miles, speaking alongside fellow OBR official Tom Josephs at a Treasury Select Committee hearing, rejected claims that Reeves had misled the public. Miles said he did not believe that the Chancellor’s statements about the fiscal challenges facing the country were inaccurate, given the context at the time. “I don’t think it was misleading for the Chancellor to say that the fiscal position was very challenging at the beginning of that week,” he explained. He added that the OBR’s forecast, which showed a slight surplus after taking into account the productivity downgrade, did not contradict the Chancellor’s assertions that the Budget was a difficult one.

While the OBR had told the Treasury that the UK was on track to meet its fiscal targets with minimal headroom, Miles acknowledged that the Chancellor faced “very difficult choices” due to the country’s economic situation. These choices led to a Budget that included significant tax rises, including extending the freeze on income tax and National Insurance thresholds, which is expected to raise £8bn. The Chancellor also scrapped the controversial two-child benefit cap, another key element of her Budget.

The row over Reeves’ comments intensified after the release of the OBR’s forecasts, which revealed that the UK was in a better financial position than initially feared. Critics from the Conservative Party have accused Reeves of using this discrepancy to present a more pessimistic picture than was warranted, claiming that it served to justify her tax hikes and welfare reforms.

Despite the political controversy, the OBR has remained neutral, with Prof Miles stating that there was no “war” between the Treasury and the economic watchdog. While the OBR has been in discussions with Treasury officials over leaks related to the Budget and its forecasts, Miles made it clear that the two bodies were working together in the national interest.

The political fallout continues as both sides of the political spectrum seek to frame the Budget and the comments made ahead of it in a way that aligns with their interests. However, as the UK’s economy faces continued challenges, the need for balanced fiscal policies and transparent communications remains paramount.