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Rachel Reeves given vital backing after claims she ‘lied’ to public forward of Budget

A top official from the Office for Budget Responsibility has agreed Chancellor Rachel Reeves was faced with having to make “very difficult choices”

An Office for Budget Responsibility bigwig has backed Rachel Reeves’ denial that she misled the public over the state of the nation’s finances.

The Chancellor has been embroiled in a row after suggesting in advance of the Budget that she had a black hole in the national coffers that needed to be filled, paving the way for a wave of tax hikes. In fact, the OBR informed Ms Reeves on October 31 she had a £4.2billion surplus.

Tory leader Kemi Badenoch has seized on the issue in repeated calls for the Chancellor to quit, accusing her of giving an overly pessimistic impression of the public finances as a “smokescreen” to raise taxes. Ms Badenoch went as far as claiming Reeves had “lied to the public”.

Much of the focus has been on a speech Ms Reeves gave in the run-up to the Budget.

Professor David Miles, a member of the OBR’s steering committee, was grilled by MPs over the issue. “I don’t think it was misleading for the Chancellor to say the fiscal position was very challenging at the beginning of that week,” Professor Miles told the Commons Treasury Committee yesterday. “Whether a message was put out to say it was less challenging by the end of the week, I don’t know. It certainly didn’t reflect anything that was news from the OBR being fed into the government.”

He earlier said: “The Chancellor was saying this was a very difficult Budget and very difficult choices needed to be made,” adding this was in line with an assessment it had handed to the Treasury.

In it, the OBR warned about what Prof Miles called a “wafer thin” financial buffer – known as headroom – left over after the government meets its expected budget costs under its own fiscal rules. Ms Reeves said increasing the headroom to cope with future shocks was a reason for tax hikes.

Prof Miles said the forecast surplus was before taking account of two big government U-turns, on winter fuel payments and benefits, which put added strain on the public finances. His comment echoes statements made by the Chancellor since.

Ahead of the Budget, Ms Reeves repeatedly warned that the OBR’s downgrading of productivity would have an impact on the public finances – fuelling speculation that she would break Labour’s manifesto commitment not to increase income tax rates. The Chancellor in part blamed the £26billion of tax rises in the Budget on the downgrade.

The committee had been due to hear from OBR chair Richard Hughes. However, he quit on Monday after taking responsibility for the shambolic leak of the Budget contents in advance. His resignation came with the relationship between the OBR and the Treasury under strain after a Budget process characterised by leaks and briefings about the state of the public finances.

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Professor Miles sought to downplay a rift, telling MPs: “I wouldn’t say we were at war with the Treasury. I mean, we have a very close relationship with the Treasury. In fact, we rely not just on the Treasury but other departments in Government for analysis of many sorts of measures.”

But he said the OBR had raised concerns with Treasury officials about leaks, adding: “I think it was clear that we didn’t find this helpful. We made that clear.”