OBR Forecasts

Statement

My Lords, with the leave of the House, I shall repeat a Statement on the OBR forecasting process made in the other place earlier today by my right honourable friend the Chief Secretary to the Treasury. The Statement is as follows:

“Mr Speaker, I would like to make a Statement to the House on two separate but related matters. The first is regarding communication with the public in the lead-up to the Budget. I understand that this is a topic that has held much interest and speculation over the weekend and I would like to take this opportunity to give a formal Statement to the House on the Government’s position. However, the Government have also today received the results of the OBR’s investigation into the early release of the Economic and Fiscal Outlook at the Budget last week. I know that the House will be concerned to understand those findings, so the majority of my Statement will be concerned with this latter point.

On the former point, the Chancellor has been entirely consistent and honest with the public about her considerations in the lead-up to the Budget last week. First, she was clear on her priorities for the Budget on 4 November: cutting NHS waiting lists, cutting the cost of living, and cutting our debt and borrowing. The Budget she delivered last week delivered on all three of those priorities. Secondly, she was clear on 4 November that a lower productivity forecast would mean lower tax receipts. The OBR confirmed at the Budget that tax receipts are £16 billion lower as a result of its reduced productivity forecast.

Thirdly, the Chancellor was clear on 4 November that she intended to build more headroom. She has done that, with headroom against the stability rule of £21.7 billion. Fourthly, she was clear in the summer that the policy decisions we took on welfare would need to be paid for at the Budget, and the Budget document shows those decisions costing £6.9 billion in 2029-30. Finally, the OBR has now confirmed that the Chancellor knew on 4 November that she had only £4.2 billion of headroom against her fiscal rules, meaning that once the cost of those policy decisions was accounted for, there would be a deficit of £2.7 billion against the stability rule.

The combined effect of this information is this: on 4 November, the Chancellor knew that the Government would be in deficit against the stability rule before any of this Government’s priorities for the Budget had been delivered or any additional headroom had been built. In the light of this information, and in the knowledge of the OBR’s productivity downgrade, the Chancellor knew on 4 November that challenging decisions would be required on tax and spend. The subsequent decision to freeze personal tax thresholds for a further three years shows that this was completely correct.

The Chancellor took the unique step of delivering that scene-setter speech before the Budget, precisely so that she could be honest about the circumstances that she was facing and the decisions she would need to take. The Chancellor has been completely honest and consistent with the public in everything that she has said.

I turn now to my second topic. Last Wednesday, before the Chancellor had begun to give her Budget speech, the Office for Budget Responsibility published its entire Economic and Fiscal Outlook November 2025 online. Let me be clear: this is a very serious breach of highly sensitive information. It is a fundamental breach of the OBR’s responsibility, it is a discourtesy to this House, and it should never have happened. The OBR rightly took full responsibility and issued an apology to the Chancellor later that day. It has now conducted an investigation into how the report was published prematurely, and it sent its report, including its findings, to the Treasury and the Treasury Select Committee today at 12.30 pm.

The report states:

‘We are in no doubt that this failure to protect information prior to publication has inflicted heavy damage on the OBR’s reputation. It is the worst failure in the 15-year history of the OBR’.

It adds:

‘The ultimate responsibility for the circumstances in which this vulnerability occurred and was then exposed rests, over the years, with the leadership of the OBR’.

The report notes that this has

‘inflicted heavy damage on the OBR’s reputation’,

and caused significant disruption on Budget Day ‘to the Chancellor’s disadvantage’. I can confirm to the House that the report goes on to make it clear that this is a significant and long-standing issue that has allowed external users to gain early access to the OBR’s publication, which contains full details of its forecasts and the Chancellor’s Budget.

In the days since the Budget, there has been speculation about the kind of error that led to the Economic and Fiscal Outlook November 2025 being published early. The report today confirms that the cause was not

‘simply a matter of pressing the publication button on a locally managed website too early’.

The report concludes that the cause of the OBR’s error was ‘systemic issues’, and that the investigation has made it clear that

‘the problem exposed last week was not a new one’.

Indeed, I can confirm to the House that the report reveals that the OBR’s EFO in March was accessed before the Chancellor delivered the Spring Statement to the House. That underlines just how serious a situation this is. Let me underline just how seriously we as a Government take it to ensure the OBR never allows this to happen again.

The report notes that common and fairly basic protections to prevent early access, including passwords and random character URLs, were not used. It further notes that two configuration errors, which were not understood by the OBR’s online publishing function, prevented the safeguards in its online publishing software being effective.

However, I am very concerned to share that the report also notes that

‘it is very likely that the weaknesses that caused the premature accessing of the November 2025 EFO were pre-existing. Indeed, it appears that the March 2025 EFO was accessed prematurely’.

These findings are very serious indeed. That market-sensitive information was prematurely accessible to a small group of market participants is extremely concerning; that it might have been the case on more than one occasion is even more severe. We do not at this stage know the extent to which market behaviour may have been affected on this or other occasions as a result of information being available early.

I want to share one further piece of information from the report with the House today. On the morning of the Budget, the first IP address to successfully access the economic and fiscal outlook had made 32 prior attempts on the day, starting around 5 am. Such a volume of requests implies that the person attempting to access the document had every confidence that persistence would lead to success at some point. This unfortunately leads us to consider whether the reason they tried so persistently to access the economic and fiscal outlook is because they had been successful at a previous fiscal event. At this time, we do not have answers to all these questions, but I can confirm that the Treasury will make contact with previous Chancellors to make them aware of developments that relate to previous fiscal events. The OBR has rightly conducted its initial investigation as quickly as possible, and it is right that both the Government and the Treasury Select Committee now take time to consider the report and its findings. The Treasury Committee will have the opportunity to carefully question the OBR tomorrow at its post-Budget hearing.

Furthermore, in response to the recommendation in paragraph 3.4 that the problem exposed last week was not a new one, I can confirm to the House that the Government will work in conjunction with the National Cyber Security Centre to take forward the recommendation that a forensic examination of other fiscal events is carried out, although let me specifically note to the House that the report finds no evidence of hostile cyber activity. In addition, the report says that the OBR

‘could not, in the time available, carry out deeper forensic examination of other recent EFO events and we recommend that such an exercise is, with expert support, now urgently carried out’.

We will make sure that work is carried out urgently. We will look at wider questions of the systemic risk that this incident has uncovered, including the report’s conclusion that the OBR’s information security arrangements

‘should have been regularly re-examined and assured by the management of the OBR’.

This Government are committed to the independence of the Office for Budget Responsibility and its role at the heart of economic and fiscal policy-making. The strength of that institution is a vital pillar in the Government’s economic and fiscal policy-making, and we will respond to this matter with the seriousness it demands”.

My Lords, I begin by noting the resignation of Richard Hughes from his position as chair of the OBR and thank him for his service in that role, which he has occupied since 2020. We in the Opposition will carefully study the contents of the report that has been issued today into the highly regrettable early release of the economic and fiscal outlook. We welcome the seriousness with which the OBR has treated this matter.

We expect those in positions of power to act with transparency, openness and integrity. The only person who has shown any integrity in this process has demonstrated it by resigning. Perhaps the Chancellor might want to follow his example.

We must not let today’s report be a convenient distraction from the matter we are discussing, namely the accusations that the Chancellor misled the Cabinet, the markets and the public in the run-up to the Budget. On 4 November, three weeks before the Budget, the Chancellor held an extraordinary press conference to warn that a downgrade in the public finances meant that taxes would have to rise. She pointed to a supposed collapse in productivity and said this had consequences for working people and for the public finances too. No one compelled her to make that announcement. She chose to do so. She signalled openly that she was preparing to break the Labour manifesto by raising the basic rate of income tax, presenting this as unavoidable.

Yet we know that the picture she painted was not the full truth. There was a sin of omission. What she did not tell the public, Parliament or even her own Cabinet was that the public finances had actually improved. Higher than expected tax receipts had offset most of the productivity downgrade. By 31 October, four days before her press conference, the OBR had informed her that she in fact had a £4.2 billion surplus against the main fiscal rule and not a black hole. The omission of material fiscal information during the most sensitive period of the economic calendar is extraordinarily serious. The OBR was so concerned by the misconceptions circulating before Budget day that its chair took the highly unusual step of writing publicly to the Treasury Select Committee to correct the record. He confirmed that the Chancellor had been informed as early as 17 September that improved tax revenues largely wiped out the productivity downgrade. Yet on 4 November she chose to speak only of gloom, and working families, savers and businesses all made decisions as a result. People judged their financial futures based on those statements. The markets reacted; journalists reported. Those words and the briefings and selective leaks that followed came from the Chancellor, her officials and her Government, and they were incomplete, confusing and misleading. They came on top of weeks of U-turns, backtracking, redrafting and contradictory briefings. I think I have recalled this chaos in earlier debates.

My Lords, this really has been a bit of an omnishambles with announcements, scene-setting musings, U-turns, misstatements and leaks—speculation that, for a time at least, spooked the markets, raising interest rates on government debt and causing such uncertainty that businesses and individuals delayed or abandoned decisions. We in this House have felt for the Minister, who has tried to hold the line by refusing to speculate despite being inveigled by pretty much all of us to try to make him do so. Frankly, all around him, others were simply flying kites.

On the issue of the OBR, Richard Hughes has taken the honourable step of resigning. Like others, I agree that he is very much the embodiment of a dedicated civil servant and has contributed much to the economic welfare of this country. Can the Government tell us, now that they recognise the seriousness of the breach, whether it is possible that attempts to access this information actually rise to the level of criminality? Are we looking at a possible issue around that? Also, is the security review being extended to other entities at arm’s length from the Government that might also have significant information but not the security that is necessary?

On the Chancellor, we need to understand much better why statements about tax receipts were omitted from the discussion on 4 November. This sits within the context of the omnishambles that I described. I am very concerned, for the future, that this form of extreme kite-flying—not just on this Budget; we have certainly seen it on earlier Budgets—has become so normalised that it has, in effect, killed off purdah. I am not sure that that is good for either the economy or how the markets behave.

In that case, will the Government recognise that they need to overhaul the whole Budget process? In the Swedish example, the Parliament gets to debate the Government’s Budget before it is set in stone, to propose alternatives and to make amendments; that is then followed by a period of scrutiny and accountability. Will the Government now bring forward a new approach to this process—one that enhances accuracy and transparency and properly restores both public trust and the role of Parliament?

I am very grateful to both noble Baronesses for their contributions and questions.

The noble Baroness, Lady Neville-Rolfe, began by paying tribute to Richard Hughes, his actions today and his record of public service. I was very fortunate to work with him while I was a special adviser in the Treasury; he was my private secretary while I was a special adviser. I absolutely know what the noble Baroness said about his commitment to public service, so I join her in those words. The Chancellor said earlier today:

“I want to thank Richard Hughes for his public service and for leading the Office for Budget Responsibility over the past five years and for his many years of public service”.

This Government are committed to protecting the independence of the OBR and the integrity of our fiscal frameworks and institutions.

The noble Baroness, Lady Neville-Rolfe, spoke about misleading. I fundamentally reject that. The Chancellor has been completely honest and consistent with the public in everything she has said. On 4 November, the Chancellor said that her priorities were cutting the cost of living, NHS waiting lists, debt and borrowing. The Budget delivered precisely on those priorities. The Chancellor was clear that, if there were a productivity downgrade, that would mean lower tax receipts. The OBR confirmed that tax receipts are £16 billion lower than they otherwise would have been. The Chancellor said that she intended to build more headroom, and she did—to £21.7 billion. The Chancellor was clear that policy choices would need to be paid for; the Budget shows that those cost £6.9 billion. The Chancellor was clear that challenging decisions would need to be taken on taxation and spending, and she froze thresholds for a further three years. So, as I say, the Chancellor was completely honest and consistent with the public in everything she said.

I note that the noble Baroness, Lady Neville-Rolfe, spoke of a “supposed” productivity collapse, as if she were trying to make light of the fact that the OBR looked back at the past 14 years and revised its view of what the previous Government had done to the economy downwards. It looked at the chronic lack of investment, Brexit, the mini-Budget and all of the other things the previous Government had done, and it was forced to downgrade productivity—the performance of the economy—as a result. It put that forward and said that that did lasting damage to the economy. The noble Baroness described that as “supposed”, so I would like her to acknowledge that that was real and has real, lasting consequences.

My Lords, this is the second fantasy black hole of this Government. The first did not actually matter because absolutely nobody believed it. No credible economist believed it; I challenge noble Lords to name one who did. However, the second fantasy black hole does matter, because we were all sucked into it to the point where people like me—and, indeed, including me—took financial actions and decisions based on that speech of 4 November. These were irreversible financial decisions based on the words of the British Chancellor. Frankly, like Chris Mason of the BBC, no less, we feel misled. The Chancellor knew that tax receipts were higher than the rest of us knew. This means that people can no longer trust this Chancellor. We cannot believe any of her future statements. If that is the case, does the Minister, who has our confidence and credibility, not agree with me that she surely cannot remain as Chancellor?

I am grateful to the noble Lord for his kind words about me, and I am grateful that I have his full confidence. Do I agree with what he says about the Chancellor? It will not surprise him to hear that, no, I do not. The Chancellor has been completely honest and consistent with the public in everything she has said.

The noble Lord says that no one believed the £22 billion black hole. It may be living rent-free in his head, because he has mentioned it probably more times than anyone other than me in this House, so, on that measure alone, it has been extremely successful.

The noble Lord said that he feels misled. I am sorry about that, but the Chancellor said absolutely nothing misleading. As I say, she has been completely honest and consistent. She set out in advance what her priorities were, and she delivered on those priorities. She set out in advance that a productivity downgrade would mean lower tax receipts, and it did mean £16 billion lower tax receipts. She said that she intended to build more headroom, and she built more headroom—to £21.7 billion. She was clear in the summer that policy choices would need to be paid for, and the Budget shows that those policy choices cost £6.9 billion. She said that challenging decisions would be needed on tax and spending, and she froze thresholds for a further three years, among other taxation decisions. So, as I say, she was entirely consistent in what she said before and what she did in the Budget.

My Lords, the Opposition suggested that markets were misled. Does the Minister agree that, if markets had been misled by the Chancellor’s speech on 4 November, there would have been a sharp market reaction when the truth was revealed in the Budget? But quite contrary to the erroneous statement by the noble Baroness, Lady Neville-Rolfe, there was no sharp reaction. Indeed, the markets after the Budget displayed a similar rate of return on 10-year bonds as they did immediately after the speech on 4 November. There was no significant change because they were not misled. The fiscal balance in both cases was roughly the same. Do these erroneous statements not suggest that the Chancellor’s critics have a lamentable lack of understanding of how the financial markets actually work?

I am grateful to my noble friend for what he said. Obviously, I cannot comment on any specific market movements or lack thereof, but he is absolutely correct that no one at any point was misled. The Chancellor was honest and consistent with the public in everything that she said. My noble friend is absolutely right about the positive market reception to this Budget because we have put fiscal responsibility at the heart of it. We have reduced borrowing every single year of the forecast. We are reducing borrowing further than any other G7 country and net financial liabilities are lower at the end of this forecast period than the beginning. As I said, this is completely consistent with what the Chancellor set out at the start of this process—that she wanted to see debt and borrowing fall as a result of the Budget.

My Lords, would the Minister agree that the real flaw in all this debate is putting such importance on such tiny movements in forecasts? The OBR itself admits that its forecasts tend to overestimate GDP growth and productivity. The reliance on these figures on such short-term movements is utterly crazy when something such as the student loan book stands at nearly £300 billion. Could the Minister tell us what sort of a shortfall he expects to come out of that in the end?

I have some sympathy for the premise behind the noble Baroness’s question. That is why it is important that in this Budget we rebuilt headroom. The Chancellor said at the start of this process, in her speech on 4 November, that she wanted to build greater resilience against global shocks and the kinds of events we are seeing around the world. That is why she built more headroom in the Budget, to £21.7 billion. That provides a greater cushion, for the exact reasons the noble Baroness is saying. The noble Baroness said that the OBR tends to overestimate GDP growth. Obviously, this year it underestimated it, because we beat the forecast for this year. It estimated that growth would be 1% but it turned out to be 1.5%. We were the fastest growing economy in the G7 for the first half of this year and we are on course to be the second fastest for the year as a whole. That is an achievement. She spoke about overestimating productivity, and she is absolutely correct on that. Productivity was downgraded because of the abysmal record of the party opposite over 14 years.

My Lords, I take very much on board what the Minister has said about the Chancellor’s announcement that she wanted to increase and improve the headroom. I have been thinking about why the one thing she did not disclose at the time was the extra tax receipts. I suspect the Minister will say he is not prepared to answer this, but I will ask him. Would he accept that it is quite difficult for any Chancellor of the Exchequer to increase headroom when the pressures come? If you are a Tory Chancellor, they come from everybody sitting over there who wants to reduce taxes; if you are a Labour Chancellor, they come from everybody over there who wants to improve public services. Would he accept the possibility that the reason the Chancellor kept this to herself was in order to be able to increase the headroom without those pressures?

I definitely agree with the middle part of the noble Lord’s question on the importance of fiscal responsibility to securing the objectives that we want to see. The best way to provide more money for public services is to reduce the amount we are paying on debt interest; fiscal responsibility is vital to that. As I have said, we are cutting borrowing in every year of this forecast. We are cutting borrowing faster than any other G7 country and we have doubled the amount of headroom. That all helps to support the amount that we pay on debt interest coming down. That gives us more money to spend on the priorities that we all want to see: improving living standards, cutting NHS waiting lists and having more money to fund the public services. Fiscal responsibility is completely consistent with the objectives of this party in funding public services and improving living standards.

My Lords, please allow me to quote the former chair of the OBR on the black hole that the Minister has now referenced over 50 times at the Dispatch Box:

“Nothing in our review was a legitimisation of that £22 billion”.

Last week, the OBR said that:

“At no point in our pre-measures forecast process were either of the Government’s fiscal targets missed by more than £2.5bn”.

Why are the Government saying something completely different from the OBR?

I am grateful to the noble Earl for pointing out my message discipline at this Dispatch Box. I am proud to have mentioned that £22 billion black hole over 50 times. The two noble Lords sitting next to each other are the other two Members of this House who have mentioned it almost as many times as I have. I think every time the noble Earl has made reference to the £22 billion black hole, I have pointed out to him that the OBR review ran up to six months before the end of the previous Government’s time in office. It identified a black hole and then the party opposite had another six months to continue adding to that hole and to continue to conceal it from the OBR. The OBR says in terms that it was concealed from it. That is a very serious charge.

Regarding what the OBR says about headroom, as I said, on 4 November, the Chancellor had £4.2 billion of headroom before any policy choices we had already announced were accounted for. Once those policy choices were accounted for, she would have a deficit of £2.7 billion. I do not think that anyone on the opposite side of the House thinks that going to the country with a £2.7 billion deficit rather than any headroom would be a fiscally responsible thing to do, given how uncertain the world around us is. It is absolutely right that we increased headroom to £21.7 billion.

My Lords, I add my praise for Richard Hughes and his outstanding public service, mentioned by the noble Baroness, Lady Neville-Rolfe, the Minister and others. I have two questions for the Minister about the Treasury-OBR relationship going forward, learning the lessons from what has happened.

First, the Treasury was clearly very annoyed by the OBR’s letter to the Treasury Select Committee, detailing the timeline of discussions. Is it the Minister’s understanding that there is a strong Treasury preference that the OBR does not do that in future? I think I know the answer, but how important is that to the Treasury-OBR relationship? Secondly, the Minister has rightly talked about defending the independence and continued existence of the OBR, but is there now discussion about changing its remit and role in the process, in the light of what has happened in the past few weeks?

I am grateful to my noble friend for the points and questions he raises. I had the great privilege of working with him in the Treasury at a time when Richard Hughes was working for us, so we both know the commitment that Richard Hughes has to public service.

My noble friend asked about the relationship with the OBR. I start by saying how strongly we support the Office for Budget Responsibility and its ongoing independence. The first piece of legislation passed by this Government after winning the election was to strengthen the role of the Office for Budget Responsibility, because we had seen, during the Liz Truss mini-Budget, what happens when it is cut out of the process. We saw how damaging that is to the living standards of working people and we are determined that that never happens again. We have absolute commitment to the ongoing independence of the Office for Budget Responsibility.

My noble friend asked about the letter from the OBR to the Treasury Select Committee. We put the utmost weight on Budget security. The OBR chose to publish some further information, which is set out fully in Richard Hughes’s letter to the Treasury Committee. The Treasury agreed in advance to its publication. However, it is important to maintain a private space between the Treasury and the OBR for the exchange of forecast information and Budget policy development, so we welcome the OBR’s statement that this is not intended to become usual practice.