Prof David Miles, a key figure from the Office for Budget Responsibility (OBR), appeared before the Treasury Select Committee to clarify comments made by Labour’s Shadow Chancellor, Rachel Reeves, regarding the financial challenges facing the UK ahead of the upcoming Budget announcement. Prof Miles, joined by fellow OBR official Tom Josephs, went some way to addressing MPs’ concerns. They unpacked the fiscal landscape and what Reeves’ latest word might mean.
During his testimony, Prof Miles stated that he believed Reeves’ remarks were “not inconsistent” with the reality of the economic landscape she confronted. He emphasized that despite the existing forecasts, the Chancellor must navigate a “very difficult Budget and very difficult choices.” This welcome recognition further sheds light on the long-lasting attempts to mobilize the UK’s financial architecture as it looks ahead to the upcoming Comprehensive Spending Review.
As prof Miles pointed out, that still leaves the Chancellor with just a £4.2 billion rain day fund. This is £3.6 billion less than the £9.9 billion that Reeves had to play with in her last full Budget. He pointed out that this is only enough for a small cushion. It cannot be confused with a deep fiscal well-being.
“I don’t think it was misleading, for my own view, for the chancellor to say that the fiscal position was very challenging at the beginning of that week.” – Prof David Miles
Yet the OBR’s analysis revealed that the most significant effect came from recent government U-turns on welfare and winter fuel payments. Without these changes, this stretch of buffer might’ve dropped all the way to -£3 billion. This huge cut is a reminder about how dangerous the current fiscal climate is.
Prof. Miles in his blue suit, white shirt, and grey striped tie. In making the case for more sustainable transport funding, he passionately illustrated how the “headroom” chancellors have been allowing themselves has dramatically dried up in recent years. He highlighted this by explaining that headroom peaked at nearly £80 billion in 2014. Yet by March 2025, it had fallen to a mere £9.9 billion, unchanged since Reeves’ Autumn Budget. He restated that this amount is extremely low by historical standards and creates a problematic dynamic for fiscal planning.
“This is very, very good news, there is no hole to fill – as people were saying.” – Prof David Miles
This statement reflects Prof Miles’ concern that some interpretations of the OBR’s findings may have created an overly optimistic narrative regarding the UK’s financial health. He continued to express frustration over misinterpretations of OBR data, stating, “I think it was clear that we didn’t find this helpful. We made that clear.”
The committee hearing comes on the heels of Richard Hughes’ recent resignation from the OBR. His departure raises critical and pressing new questions about leadership and direction within the organization. It’s crucial that bright lining these discussions now coincides with what will likely be very contentious fiscal discussions to come.
As MPs continue to look at the fiscal situation. At the same time, Prof Miles warns about the difficulties of budgetary planning within our fast-moving economic environment. The next Budget will need to be smart to steer through these headwinds. Reeves’ past decisions will surely shape future economic initiatives.