Did Treasury Violate Law by Withholding £9.5bn Spending in Tory Budget?

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Treasury officials may have violated legal protocols by not disclosing a £9.5 billion spending commitment in the Conservative budget last March, as members of Parliament were informed. According to Richard Hughes, head of the Office for Budget Responsibility (OBR), this undisclosed expenditure could have significantly altered the economic forecast tied to Chancellor Jeremy Hunt’s pre-election budget.

 

The law mandates that the Treasury must provide accurate budgetary information to the OBR to ensure a reliable economic forecast. Hughes explained to the Commons Treasury committee that he had no reason to complain when the budget was initially presented because, in his words, “what you don’t know, you don’t know.” However, Hughes asserted that if the £9.5 billion commitment had been revealed, it would have “materially changed” the forecast’s economic impact assessment.

 

The issue has led Treasury committee chair Meg Hillier to pursue a legal inquiry to determine if any laws were indeed broken. When asked about the accountability of Downing Street officials, a spokesperson for Labour leader Keir Starmer pointed to Tory ministers, stating that “civil servants advise and ministers decide,” suggesting that ultimate responsibility lies with the ministers overseeing these policy decisions.

 

Hughes, responding to broader questions about fiscal policy, warned that the Labour party's proposed increase in employers' national insurance contributions could lead to lower real wages in the long term. Chief economic adviser David Miles added that about three-quarters of this tax increase’s impact would fall on workers, with the remaining burden on profits. “Nobody escapes completely,” Miles stated, though he emphasized that the brunt would affect wages more than profits.

 

Productivity growth, another critical economic factor, has been “abysmal” over the past decade, according to Miles, but he anticipated improvement through the end of the decade, which could, in turn, drive wage recovery.

 

Reflecting on the OBR’s oversight procedures, Hughes announced that the organization is revising how it collaborates with the Treasury in producing economic forecasts. Legislation established in 2010 by then-Chancellor George Osborne outlines the parameters of the Treasury-OBR relationship. Hughes described the shift as moving from a “system of trust” to a “trust but verify” approach, aimed at preventing similar disclosure failures in the future. This change will require the OBR to closely scrutinize departmental spending limits and budgetary preparations to ensure any budget pressures are openly discussed and appropriately managed.

 

The breakdown in this high-trust relationship became apparent when the OBR discovered the previously undisclosed £9.5 billion spending pressure. Hughes said the OBR had built a system assuming that departmental spending was well managed within allocated limits. He remarked, “That system very clearly broke down,” noting that the OBR was unaware of the extent of the additional budget pressures until Chancellor Rachel Reeves highlighted a £22 billion shortfall in July.

 

In explaining how the OBR could have overlooked such significant budgetary pressures, Hughes pointed out that while the Treasury has numerous public servants dedicated to managing departmental budgets, the OBR operates with a much smaller team focused on scrutinizing perceived high-risk areas.

 

The inquiry into the Treasury’s omission revealed that civil servants and ministers withheld information on £9.5 billion in spending pressure, despite legal requirements to disclose such details to the OBR. Hughes emphasized the importance of this discovery, noting that even slight economic shifts—like a 0.3% increase in interest rates—could deplete the fiscal buffer that Labour’s budget currently maintains. The “fiscal headroom,” or buffer between total income from taxes and spending, was set by Labour at £11 billion over five years. With economic volatility, that cushion could quickly vanish, causing the Treasury to breach its debt reduction target.

 

OBR committee member Tom Josephs underscored this precarious situation by noting, “To get the current balance down to essentially zero... we have 0.3%.” Hillier, chair of the Treasury committee, called this scenario a significant risk, highlighting how easily a minor change in interest rates could destabilize the budget plans.

 

Based on a report by the Guardian 2024-11-07

 

 

 

[tmd5855]

So when Cameron and Osbourne brought in the 'Austerity years' we now know it never worked except to alienate a majority of the population resulting in blaming everyone but, the Government.  Immigrants bad, EU bad, etc.

 

I wonder if no Austerity years but tax rises and expand the economy would we still be in the EU where before the vote 2015-2016 pound were 54 -50, then collapsed on the "Leave" result.  We sure have some smart, intelligent folk in power with their finger on the pulse of the people. 

 

Sad, my children have never had the opportunities in the UK I had which took me overseas working for 38 years.