Jeremy Hunt’s spending forecasts are to be investigated by the Office for Budget Responsibility (OBR) after the discovery of a £22bn black hole in the public finances.
Richard Hughes, head of the spending watchdog, announced a formal review into the forecasts for the Spring Budget.
It is the first time the OBR has introduced such a review. Mr Hughes claimed he was alerted to the “seriousness” of the issue at a meeting with the Treasury last week.
In a letter to the Treasury select committee, he said: “This would constitute one of the largest year-ahead overspends against Departmental Expenditure Limits (DEL) forecasts outside of the pandemic years.
“The review will assess the adequacy of the information and assurances provided to the OBR by the Treasury regarding departmental spending.”
It comes after Chancellor Rachel Reeves criticised the Conservatives’ handling of the public finances in the House of Commons on Monday, during which she also announced a series of spending cuts to plug the gap.
She said: “Upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know, things that the party opposite covered up: covered up from the opposition, covered up from this house, covered up from the country.”
Labour’s audit of the Treasury’s finances under Mr Hunt has prompted the OBR’s investigation, although Mr Hughes said he had raised concerns over the Treasury’s numbers in the past.
He said: “I have expressed my concerns about the transparency and credibility of the existing arrangements within the government for forecasting, planning, and controlling the 40pc of public expenditure within DEL.
“The OBR has highlighted potential overspending against the DEL plans set by the Treasury as one of the most significant risks to the fiscal outlook.”
In his response to Ms Reeves’ accusations, Mr Hunt said the alleged black hole was being used to justify tax hikes, while also claiming the state of the public finances was clear before the election.
He said: “Those public finances were audited by the OBR just 10 weeks before the election was called. We are now expected to believe that in that short period a £20bn black hole has magically emerged.
“She wants to blame the last Conservative government for tax rises and project cancellations she has been planning all along.”
To ensure the OBR does not encounter similar issues in the future, Ms Reeves vowed to share more information with the watchdog.
She said: “We will require the Treasury to share with the OBR its assessment of immediate public spending pressures, and enshrine that rule in the Charter for Budget Responsibility so no government can never ever again cover up the true state of the public finances.”
Ms Reeves also hit back at suggestions that the Treasury’s top civil servant played a part in the failures because of his role in signing off government spending projections.
Asked if she had “confidence” in permanent secretary James Bowler, Ms Reeves replied: “In the end, civil servants advise and ministers decide. And ministers made decisions to sign off spending without any idea of how it was going to be paid for.
“When I arrived at the Treasury on July 5, I asked civil servants to provide me with an honest assessment of the state of our public finances and public spending pressures.
“They have done that with great professionalism and I believe that they provided similar information to the previous chancellor. He chose to ignore it. I will not ignore the pressures on our public spending and our public services.
She also accused Mr Hunt of “trying to pass the blame” on to civil servants.
She said: “I won’t have it. I have huge respect for the civil servants in this institution that worked incredibly hard the last few weeks to provide the accurate information I presented to Parliament today.”
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