No 10 Downing StreetAt the Budget, Chancellor Rachel Reeves once again blamed the Conservatives for leaving a “£22bn black hole” in the public finances.
A report from the Office for Budget Responsibility (OBR), which makes forecasts for the government, found there had been information it should have been given by the Treasury, but only listed a £9.5bn shortfall.
Nonetheless, it said forecasts in March would have been “materially different” if it had known about all the previous government’s spending plans.
Conservative leader Rishi Sunak said the OBR had declined to support Reeves’s claims of a £22bn black hole, saying: “It actually appears nowhere in their report.”
Government ministers have repeatedly used the figure to justify the decision to cut the winter fuel payment and raise taxes.
Was there £22bn of unknown spending?
The OBR published a report on 30 October looking at whether there had been information about pressures on spending that it should have known about in February when it was working on its forecasts to go with the March Budget.
It asked the Treasury for an estimate of these pressures and was given a figure of £9.5bn, which is considerably below the £22bn in the July report.
“Had we known that information we would have had a materially different view about the level of public spending this year,” OBR head Richard Hughes told News.
“We can’t say how different that would have been because we would have had to have had a different conversation with the Treasury in the light of that information.”
The Treasury also told the OBR that between February and March there had been decisions taken including allocating more money to the NHS and local authorities, which the OBR also was not told about.
Those decisions took £3.5bn out of the reserve that is meant to pay for unexpected spending.
Reeves told News that the rest of the £22bn was overspent between the Budget and the 4 July election.
Where does the £22bn claim come from?
Was there a big overspend?
To put those figure into context, in the Spring Budget it was expected that total public spending this year would be £1,226bn. Either £9.5bn or £22bn would be a small proportion of that.
But by the standards of government overspends, either would be unusually large.
Spending was much higher than expected due to Covid in 2020 and 2021 and also almost £10bn higher than expected in 2023 because of inflation caused by Russia’s invasion of Ukraine.
Outside those years there have not been overspends close to £9.5bn.
This piece was originally published on 3 September 2024 and has been updated following the OBR report that accompanied the 30 October Budget
