“PM’s £16bn Warning Selective, OBR Documents Suggest”

Sir Keir Starmer repeated his claim that he “started off £16 billion down”. He said this figure came from the Office for Budget Responsibility (OBR), which had given the government the worst outlook for economic growth in years. Sir Keir argued that this meant there was “no misleading” by the government. According to him, if the OBR says its productivity review means the government has £16 billion less than expected, then it clearly wasn’t an easy starting point. However, this is only part of the picture. The Prime Minister wasn’t inventing numbers, but he focused only on the bad news while ignoring the good news in the OBR’s analysis. This made the situation sound worse than it really was. The OBR did say that the productivity downgrade could reduce tax revenues by £16 billion. On that point, the PM is technically correct. But the OBR also said that higher inflation and stronger wage growth would more than make up for this loss. By 2029/30, tax revenues were actually expected to be £16 billion higher than they had forecast in March. So why did the government still end up in the red? The answer lies in spending. Extra government costs, including £22 billion more on welfare payments and higher debt interest, wiped out the gains. Once these were included, the real starting point for the government – before any policy decisions – was a £5.7 billion shortfall, not £16 billion. The Chancellor’s “buffer”, which measures how safely she meets her borrowing rules, also shrank from £9.9 billion to £4.2 billion. Even so, she still managed to meet her main fiscal rule. In the days before the Budget, several stories appeared in the media suggesting the government was facing a huge financial black hole. These stories were encouraged by people inside the government. But the OBR’s documents, released after the Budget, show this was not accurate. This information was already known to Chancellor Rachel Reeves when she held her unusual pre-Budget press conference on November 4. The head of the OBR, Richard Hughes, became concerned enough to write to the Treasury Select Committee to correct the record. According to the OBR, taxes went up mainly because the government reversed earlier welfare cuts and because the Chancellor wanted a bigger safety margin to keep markets calm. The welfare cuts she had promised were not delivered, and the previous financial headroom was too small to absorb economic shocks. It is understandable that ministers wanted to blame the productivity downgrade, which was not their fault. But the political spin went too far. As a result, many people now feel misled at a time when trust in both the Prime Minister and the Chancellor is already very low.

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