Are the details of the alleged £22 billion fiscal black hole about to be revealed? In addition to providing assessments and forecasts for the UK economy alongside the Chancellor’s Budget on Wednesday, the Office for Budget Responsibility is also set to publish its ‘review’ into Rachel Reeves’ claim that the Tories covered up a multi-billion pound black hole in the public finances – one that she was only able to unearth after she entered the Treasury.
Since Reeves first made the accusation in July, there has been lots of speculation about how the figure was compiled – and exactly where the money went. The Treasury has not released a breakdown of the figure and has declined freedom of information requests to publish the details. So far, only parts of the puzzle have been pieced together. The Spectator confirmed in July that the money in the multi-billion pound reserve fund – which Labour claims is depleted – was not money that had necessarily been spent already. Rather, it was an estimation of what would be spent over the course of the year. This raises further questions about how the headline figure has actually been calculated.
It’s hard for any politician to claim they didn’t know about the ‘tough decisions’ coming down the road
The shadow chancellor is not pleased, however. Jeremy Hunt today has said that the OBR’s plan to release its review on Budget day is ‘a surprise and a significant concern’. His gripe is mainly procedural: both that his party should be given the ‘chance to address any criticisms made’ and also that this kind of review would be released on Budget day, which risks further politicising the findings and giving Labour cover for what is expected to be a major tax-hiking event.
‘I’m a strong supporter of the OBR,’ Hunt wrote on X this morning, in addition to posting his letter to OBR Chair Richard Hughes. ‘I was proud to serve in the government which set it up and strongly believe it enhances the UK’s economic credibility. However its credibility in holding the government to account depends on political impartiality so if that is being undermined friends need to say so. It cannot be right to publish a review of what happened under the previous government without consulting those who had political responsibility at the time.’
Hunt has indeed been a defender of the OBR and Treasury officials worked closely with the independent body after Liz Truss’s mini-Budget, which he largely undid after being appointed Chancellor. This gives his criticisms additional weight: they are not coming from the block of current and former Tory MPs who feel Truss was undermined by the OBR. Rather, they are coming from a former Chancellor who worked within the OBR’s guidelines and agrees with the principles behind its delivery of independent economic assessment.
There is a chance that the review delivered by the OBR will confirm Hunt’s claim that the £22 billion figure is a political creation. It could also reveal the details of a serious black hole. The fear in Tory circles, however, is that a rather dry, on-the-fence assessment is delivered instead, enabling Labour to further tie its Budget measures (including tax hikes and spending cuts) to the decisions made by the previous government.
Then the political fight only ramps up. For example, roughly £10 billion of the £22 billion is attributed to the inflation-busting public sector pay hikes Labour green-lit just weeks after the election. The government will say the Tories weren’t honest about the cost of those pay hikes in previous Budgets, and failed to plan and account for the increases. The Tories will say they would have never green-lit the recommendation in full, especially without requiring some kind of efficiency gains alongside the money.
Who is right? The OBR won’t want to say, not least as the independent body’s reputation is on the line, too, if there really were tens of billions of pounds unaccounted for in the last fiscal event. As the Institute for Fiscal Studies has pointed out many times, it’s hard for any politician to claim that they didn’t know about the ‘tough decisions’ coming down the road, as they have been laid out bare in multiple OBR assessments. It was clear long before the election that the Tories had factored in major spending cuts in the next Parliament to meet their fiscal rules, yet neither party wanted to talk about how they might find the cash to stop the cuts during their campaigns.
Both, however, are being forced to talk about it now. Whether the black hole ‘revelation’ narrative holds up after the Budget on Wednesday may determine which party is vindicated.
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