In the days leading up to the UK’s crucial 2025 Budget, a storm of political accusations, economic uncertainty, and an unprecedented data breach swirled around Chancellor Rachel Reeves and the nation’s fiscal watchdog, the Office for Budget Responsibility (OBR). As the dust settles, the full picture reveals a tale of tight finances, contested narratives, and a rare shakeup at the top of Britain’s economic oversight.
On November 4, 2025, Chancellor Reeves delivered a rare pre-Budget speech from Downing Street, painting a sobering portrait of the country’s economic outlook. She warned that the UK’s productivity was “weaker than previously thought,” adding that this shortfall had “consequences for the public finances too, in lower tax receipts.” Reeves’s somber tone, echoing throughout her press conference and subsequent interviews, fueled widespread speculation that the government was on the brink of breaching its self-imposed borrowing rules. Some even wondered if she would be forced to break Labour’s manifesto pledge not to raise income tax rates.
Yet, behind the scenes, a different story was quietly unfolding. According to the OBR, the independent body tasked with scrutinizing the government’s tax and spending plans, the Treasury had already been told on October 31 that the UK was on course to meet its main borrowing rule by a margin of £4.2 billion. This narrow buffer was largely thanks to higher-than-expected wage growth, which offset the drag from lower productivity and boosted the government’s tax receipts. However, Reeves did not mention these offsetting revenues in her November 4 speech or in her subsequent press conference, a detail that would later become a flashpoint in the political debate.
The Conservative opposition seized on this omission, with party leader Kemi Badenoch accusing Reeves of painting an overly pessimistic picture as a “smokescreen” to justify tax hikes and increased welfare spending. Badenoch went so far as to claim that Reeves “lied to the public,” intensifying the political row over the government’s handling of the economy and the information it shared with the public in the tense days before the Budget.
Amid the political uproar, the OBR was also grappling with its own set of challenges. Professor David Miles, the OBR’s head of economic analysis, appeared before the Treasury Select Committee to address concerns about the chancellor’s statements and the organization’s role in the pre-Budget process. Miles was unequivocal in his assessment: “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.” He elaborated, “My interpretation was, and others might interpret differently, that the chancellor was saying that this was a very difficult Budget and very difficult choices needed to be made. And I don’t think that that was in itself inconsistent with the final pre-measures assessment we’d made, which, although it showed a very small positive amount of so-called headroom, it was wafer thin.”
Indeed, the £4.2 billion buffer—technically known as “headroom”—was significantly slimmer than the £9.9 billion margin Reeves had left herself at the previous Budget. For context, chancellors before November 2022 typically aimed for buffers of £20 billion to £30 billion, giving them more flexibility to respond to economic shocks. The OBR’s Miles cautioned MPs not to interpret the £4.2 billion surplus as a sign that “there is no hole to fill—as people were saying,” emphasizing that the positive number was “by a tiny margin.”
Complicating matters further, the OBR’s forecast did not account for recent government U-turns on welfare and winter fuel payments. If those changes were factored in, the already slim buffer would have flipped to a deficit of £3 billion, underscoring the precariousness of the UK’s fiscal position. “It still posed a significant challenge to the government,” Miles noted, especially given the desire to increase fiscal headroom and maintain credibility with markets and voters alike.
As the Budget was unveiled on November 27, the government announced a sweeping £26 billion in tax rises. This included £8 billion from extending the freeze on income tax and National Insurance thresholds for another three years—a move projected to affect millions of taxpayers—and the scrapping of the two-child benefit cap, a major change in welfare policy. The measures, while controversial, were designed to shore up the public finances and demonstrate fiscal responsibility amid mounting economic pressures.
But the drama did not end with the Budget’s publication. In an embarrassing twist, the OBR’s official Economic and Fiscal Outlook (EFO) report—containing key details of the Budget—was inadvertently made accessible on the OBR website just under an hour before Reeves began her speech in Parliament. The premature release, caused by pre-existing IT failings that had gone undetected by the agency’s leadership, allowed 32 unique IP addresses to access the report between 11:35 am and 12:07 pm on Budget day. The blunder sparked mockery and anger among lawmakers, with some questioning the OBR’s competence and independence.
Richard Hughes, the OBR’s chairman, took “full responsibility” for the mistake and submitted his resignation on December 1. In a candid letter published on the OBR’s website, Hughes and the agency’s non-executive directors described the incident as “the worst failure in the 15-year history of the OBR.” The subsequent investigation, led by Ciaran Martin, former head of the National Cyber Security Centre, found that all those involved believed the necessary protections were in place, but they “did not work.” The directors emphasized that ultimate responsibility for the failure rested with the leadership of the OBR, but also pointed to the Treasury and the Cabinet Office for their roles in supporting the watchdog’s operations.
Tom Josephs, another senior OBR official, apologized to MPs for the early release and assured them that the agency would implement all recommendations from the investigation to prevent a recurrence. Meanwhile, Professor Miles revealed that the OBR had complained to senior Treasury officials about leaks to the media in the run-up to the Budget, saying, “I think it was clear that we didn’t find this helpful. We made that clear.” The OBR even released a letter to clarify the timings of its pre-Budget forecast rounds, hoping to correct “misconceptions” in the media that it was either acting as the government’s “patsy” or that its forecasts were “all over the shop.”
Despite the turmoil, both the OBR and the Treasury have insisted that their working relationship remains professional, if sometimes tense. “We are not at war with the Treasury,” Miles assured MPs, seeking to quell rumors of a deeper rift at the heart of Britain’s economic apparatus.
The events surrounding the 2025 Budget have laid bare the immense pressures facing the UK’s economic stewards—from the razor-thin fiscal margins to the fierce political crossfire and the vulnerabilities of even the most established institutions. As the government moves forward, the lessons learned from these turbulent weeks will likely shape both policy and oversight for years to come.
