The Office for Budget Responsibility complained to senior Treasury officials in the run-up to the budget about a flurry of leaks that it said spread “misconceptions” about its forecasts, it has emerged.
Prof David Miles of the OBR’s budget responsibility committee told MPs on the Treasury select committee on Tuesday that the watchdog had raised the issue of leaks with the department before the chancellor’s statement last week.
“I think it was clear that there was lots of information appearing in the press which perhaps wouldn’t normally be out there and that this wasn’t from our point of view particularly helpful,” he said.
He added: “We made it clear that they were not helpful and that we weren’t in a position of course to put them right.”
Miles was appearing before the committee after the OBR chair, Richard Hughes, resigned on Monday, taking responsibility for the inadvertent release of its budget documents about an hour before Rachel Reeves stood up to announce her tax and spending plans.
The prime minister’s official spokesperson insisted on Tuesday that the watchdog’s chair had not been pushed. “It’s categorically untrue that Richard Hughes was forced to go,” he said. “The chancellor has written to Richard and thanked him for leading the OBR and his many years dedicated to public service.”
As well as the premature budget release, Hughes’s departure also followed the publication on Friday of a letter that took what he called the “unusual step” of spelling out the evolution of the OBR’s forecasts over time, prompting a furious row about Reeves’s account of the backdrop to her budget decisions.
Miles said the letter was published because the watchdog felt the public had received a false impression, which was “damaging to the OBR and to the process”.
However, he denied that, as opposition politicians have claimed, the OBR’s letter showed Reeves was misleading in her 4 November pre-budget speech, in which she underlined the perilous state of the public finances.
He said the OBR’s forecasts “didn’t suggest that the fiscal outlook was problem free” and described the margin for error, or headroom, on the chancellor’s fiscal rules, which was £4.2bn in the 31 October forecast, as a “sliver” and “wafer thin”.
“I don’t think it was misleading for the chancellor to say that the fiscal position was very challenging,” he said.
However, Miles did highlight two “misconceptions” – the idea that the OBR had shifted the time period over which it assesses the yields on government bonds, perhaps under pressure from government; or that its forecasts had swung dramatically at the last minute, affecting Labour’s decision-making.
He told MPs there was “a view that the OBR’s forecasts were wildly fluctuating in the process both leading up to the pre-measures forecast, and perhaps after it as well, and that that had made the budget process more chaotic than it otherwise would have been”.
His evidence also flatly contradicted a government briefing on 14 November, as markets reacted to news that Reeves had dropped plans to raise income tax, which suggested that decision resulted from improved forecasts.
“There seemed to be a misconception that there seemed to have been some good news, and I’m not sure where that came from: it didn’t exist,” he told the committee.
“What had happened is that the forecast for headroom had gradually improved a little bit in the run-up to 31 October” (when the final ‘pre-measures’ forecast was sent to Reeves).
Questioned by the Conservative former Treasury minister John Glen, Miles said the watchdog wanted to make clear that it was not “either the patsy that was doing what the government wanted, or that through its own fickle behaviour changing from one day to the next [it] was making it virtually impossible for the government”.
As OBR officials were being questioned by MPs, the Bank of England governor, Andrew Bailey, was defending the institution against attacks.
He told a Bank press conference to launch its financial stability report: “The reason the OBR was created was to ensure there was a source of independent forecasting and an independent assessment of fiscal policy … So attacks on the OBR in terms of the principle [of independence], I would say, ‘No, can we please remember why it was done and the principles underlying it.’”
Hughes’s predecessor Robert Chote added his voice to concerns about the volume of leaks at a separate hearing, before the House of Lords economic affairs committee.
Discussing how to restore confidence in the OBR’s role, he said: “You want, bluntly, ministers and the wider political side and official side [of the Treasury] to spend the weeks running up to a budget concentrating on the substance of it and how you’re going to explain it to people after the event, rather than trying to manage expectations as you go through, or to provide a running commentary on either the policy package or on the forecast.”
Miles told the Treasury committee that the slew of leaks may have hit economic growth by exaggerating consumer and business uncertainty, which “may well have been exacerbated by leaks which some days seemed to be suggesting one thing and the next day something different”. He added: “I don’t think that can have helped.”
He defended the OBR’s decision to reassess its forecasts for the economy’s underlying productivity outlook this summer. Reeves and Keir Starmer have expressed frustration that this rethink, which led to a downgrade in growth forecasts, had not taken place earlier.
Miles said it had been important to wait until the impact of the big economic shocks of Covid and Russia’s invasion of Ukraine had faded, and it would have been “trigger-happy” to move earlier.
