OBR chief hits out at ‘misconceptions’ in Treasury briefings
A top economist at the Office for Budget Responsibility (OBR) has defended a decision to release a letter that contradicted anonymous Treasury briefings in media reports, adding that details in reports were “damaging” to the fiscal watchdog.
David Miles, a member of the Budget Responsibility Committee (BRC), told MPs on the Treasury Select Committee that a letter showing that fiscal forecasts did not dramatically change after 31 October despite media reports suggesting otherwise was released to “set the record straight on the process”.
His comments appear to take aim at a report in Bloomberg on 13 November.
Government sources told the news outlet that plans to breach the Labour Party manifesto had been ditched due to an “improved fiscal forecast” swinging the headroom available by some £10bn.
The briefing appeared to be issued after bond markets reacted violently to a Financial Times report suggesting that the government had abandoned a plan to hike income tax rates.
Miles, who was taking the lead on questions following Richard Hughes’ resignation as chair last night due to a damning report on the watchdog’s Budget leak, said it published a letter with a clear timeline of changes in its fiscal forecasts to keep transparency levels high.
“It was more that there were misconceptions out there that were wrong and actually damaging to the OBR, that we had acceded to pressure at certain points, [or] that we had helpfully found some money at the last minute,” Miles said.
“We were particularly keen to make it clear that the specific window to the interest rates were not under pressure to somehow pick a particular period that was advantageous.”
OBR economist says briefings were ‘damaging’
Shadow Chancellor Mel Stride and the SNP’s Stephen Flynn recently wrote to the Financial Conduct Authority (FCA) to demand an investigation into potential market manipulation after Reeves delivered an unusual press pre-Budget conference to warn of problems with public finances.
But Miles dismissed questions on whether Reeves herself had misled the public and markets with her 4 November ‘scene setter’ press conference in which she said that Budget measures would look to fix economic problems left by the forecaster’s downgrade to productivity trends.
“My interpretation was that the Chancellor was saying that this was a very difficult Budget and very difficult choices needed to be made,” he said, adding that the forecasts showing just £4.2bn in headroom at that point didn’t include welfare spending U-turns.
Miles also suggested it was reasonable that Reeves was pitch-rolling tax hikes before the Budget given the downgrade in headroom to £4.2bn left a “wafer thin” margin.
He also insisted the OBR was not “at war” with the Treasury.
However, his comments did not appear to defend briefings in several media reports suggesting that there was a fiscal hole amounting to some £30bn, as quoted in outlets including ITV News.
Miles also defended the timing of the OBR’s decision to look over productivity trend forecasts after Keir Starmer said he was “bemused” by the decision to revise figures.
The productivity downgrade by 0.3 percentage points cost the government some £16bn in headroom but higher wage growth and inflation built back some of the losses.
“To try and reach a judgment, let’s say two years ago, when we were still quite close to the effects first of Covid and the energy price increase, would have been very difficult because you would be trying through a fog of noise in the actual measured productivity to infer something about the trend path of something it might follow.”
Former OBR chiefs including Sir Charlie Bean have said that Reeves was warned about the productivity downgrade on multiple occasions and failed to build enough headroom last year to deal with expected revisions.
When asked about whether leaks in the lead-up to the Budget had dampened growth in the UK economy, Miles said uncertainty around government plans had likely put businesses off making investments.
“It was inevitable given the date of the Budget for where it was that that uncertainty would last.
“[Uncertainty] may well have been exacerbated by leaks that one day seemed to be suggesting one thing and another day differently.”