Chancellor Rachel Reeves is facing mounting political pressure as serious questions emerge about the timeline of economic forecasts provided by the Office for Budget Responsibility (OBR).
The Crucial OBR Timeline
The controversy centres on when the Treasury received updated economic data. David Miles, head of economic analysis at the OBR, revealed that his organisation formally informed the Treasury about a significant surge in tax receipts on 31 October.
This notification came several days before Chancellor Reeves delivered a key 'scene setter' speech where she strongly implied an impending income tax increase. The surge in tax receipts, largely driven by inflation, was substantial enough to more than cover a separate £16bn productivity downgrade that had been expected to damage public finances.
Market Turmoil and Political Fallout
Throughout November, financial markets showed significant movement in anticipation of a major tax announcement. The yield on 10-year gilts, a crucial benchmark for government borrowing costs, initially fell to 4.39 per cent following Reeves' speech.
However, when news emerged of a subsequent U-turn on the expected tax hike—attributed by reports to 'better than expected forecasts'—markets reacted with panic. Gilt yields rose at their fastest rate since Reeves' emotional appearance in the Commons, despite the OBR insisting the Treasury had possessed the same favourable forecasts since 31 October.
Official Investigations and Responses
The Treasury Committee has now launched an investigation into the timeline of events. Dame Meg Hillier, the committee's chair, has formally written to the OBR requesting additional information about what the Treasury knew and when they knew it.
In response, Richard Hughes, chair of the OBR, stated in his forecast foreword that he would write to Hillier to "set out the facts concerning the evolution of our forecast." He described this as an "unusual step" prompted by the "volume of speculation" before the budget that had moved markets.
A Treasury spokesman declined to comment on the Budget process, stating only that: "We have been clear that this Budget was about cutting waiting lists, cutting debt, and cutting the cost of living."
The situation leaves Chancellor Reeves facing difficult questions about her communications regarding the state of public finances in the lead-up to her Budget announcement.
