The UK Treasury has breached its legal obligations by failing to disclose a £9.5 billion overspend by government departments prior to the March Budget, according to the fiscal watchdog’s leadership.
Richard Hughes, chair of the Office for Budget Responsibility (OBR), revealed to the House of Commons Treasury select committee that the previously established “high trust relationship” with the finance ministry has deteriorated. The system, which oversaw 40 per cent of public spending allocated to Whitehall departments, “very clearly broke down,” Hughes stated.
The relationship must now transition from “a system of trust to a system of trust but verify,” Hughes emphasised. The OBR’s recent statement indicated that its pre-March Budget forecasts would have differed substantially had the full extent of Whitehall departmental pressures been known at the time.
Labour chancellor Rachel Reeves disclosed inheriting a previously unreported £22 billion deficit in public finances from her Conservative predecessor Jeremy Hunt. This revelation prompted Reeves to implement over £40 billion in tax increases in the recent Budget, despite earlier assurances to voters about avoiding significant tax hikes.
The Treasury defended its position, stating that ministers had communicated their intention to manage spending pressures through offsetting savings during the March Budget. A spokesperson maintained this was “within the law” and confirmed the department’s acceptance of all OBR recommendations for a new charter to prevent similar unfunded pressures from recurring.
Market response has been notable, with the spread between UK and German short-dated bonds reaching its widest margin in almost 14 months. The Treasury’s handling of this situation has sparked renewed debate about fiscal transparency and economic governance in Britain’s public sector.
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