Treasury didn’t reveal spending pressures, says watchdog

The government’s official forecaster has said it was not told by the Treasury about “large pressures” on public spending at the time of the March Budget.

A review by the independent Office for Budget Responsibility (OBR) said the then Conserative spending measures totalling £9.5bn were not shared with it, giving a false insight into the state of public finances.

Chancellor Rachel Reeves raised taxes by £40bn in the Budget, which she partly blamed on the Tories making a “series of promises” which they “had no money to deliver”.

Opposition leader Rishi Sunak said Labour’s claims were “ludicrous”, adding the tax hikes were Reeves’ choices.

Publishing its review, the OBR said that before the Budget in March the Treasury “did not share information with the watchdog about the large pressures on government department spending” totalling £9.5bn and about the “unusual extent” of spending commitments.

It said “had this information been made available”, it would have reached “a materially different judgement” about government spending in the current financial year.

Its assumption of an underspend of £2.9bn published in its Economic and Fiscal Outlook would “very likely have been dropped” and instead it would have made a “materially higher” forecast for spending this year.

However, the OBR said it could not say how much higher its forecast for departmental spending would have been.

The chancellor’s argument for higher taxes leans heavily on the OBR document, which is being seen by the government as the justification for the Budget.

In her first Budget speech, Reeves said the previous Conservative government had made spending promises which they could not fund and this was “covered up from the British people… and covered up from this House”.

She said she was publishing a line-by-line breakdown of the “black hole that we inherited”.

This showed “hundreds of unfunded pressures on the public finances… this year and into the future too”.

In July, the Treasury published an analysis of £22bn of extra spending pressures they faced. This was described by Labour as the “black hole” they inherited.

On Wednesday, the OBR describes a similar increase in spending for the year – £23bn – which they split into the omitted £9.5bn and the cost of new policies announced since the March Budget.

On Wednesday, the chancellor said: “Never again will we allow a government to hide the true state of our public finances from our independent forecaster.”

Reeves went on to say that she would implement all 10 recommendations made by the OBR in its review regarding the future relationship between the forecaster and the Treasury.

Responding to the chancellor’s Budget speech, Rishi Sunak said Labour’s claims about the state of the economy they inherited were “purely ludicrous”.

“These are her [Reeves’] choices. So, stop blaming everyone else and take responsibility.” he said.

“Her decision to let borrowing rip make a total nonsense of her claims on the state of the public finances, because if they were truly in such a dire strait, as she has said, what we should have seen today was a significant reduction in borrowing to repair them, not the splurge that she has just unleashed.”

Shadow chancellor Jeremy Hunt has previously accused the OBR of failing to act in a “politically impartial manner” by releasing its findings on Budget day.

In a letter to Hunt at the weekend, OBR chairman Richard Hughes said the review was about the “adequacy of the information and assurances provided to the OBR by the Treasury regarding departmental spending”.

The findings and recommendations were about the “institutional relationship” between the OBR and Treasury, Mr Hughes said.

He added the review did not refer to the conduct or decisions of ministers.