In this ‘clash of the chancellors’, who’s being economical with the truth?

Amid a furious war of words between Rachel Reeves and Jeremy Hunt over the £22bn black hole in Britain’s finances, a clear winner has emerged, says Sean O’Grady

Unparliamentary language: ‘Jeremy Hunt covered up from the House of Commons and from the country the true state of the public finances – he lied,’ said Rachel Reeves (UK Parliament)

You may recall some of the “informal” scenes during the state opening of parliament a few weeks ago, when politicians who’d been engaged in the most vicious of arguments, including claims of weakness, corruption, stupidity and lying, could now be glimpsed joshing away on the floor of the chamber. There was the quartet of Rishi Sunak, Angela Rayner, Oliver Dowden and Keir Starmer, swapping gags like nothing had changed.

A little behind them, we could see Jeremy Hunt chatting with Rachel Reeves, her neck craning a little beside her tall predecessor, the pair acting like normal human beings.

No doubt the chancellor and now former chancellor still try to maintain civilised relations, but there wasn’t much amity on display in their exchanges in the Commons yesterday. Seasoned parliamentary observers remarked that both were pretty angry.

Reeves had about her the quiet fury of a deeply disappointed nanny who’d entered the nursery to find the whole place had been trashed by its juvenile, irresponsible occupants; while Hunt was yelling and shouting and telling her not to be so silly. Punch-and-Judy politics, then – but with rather more venom and some very serious issues at stake.

When she later appeared on Sky News, the chancellor resorted to unparliamentary language, branding her predecessor in No 11 a liar: “Jeremy Hunt covered up from the House of Commons and from the country the true state of the public finances,” she said. “He did that knowingly and deliberately. He lied – and [the Tories] lied during the election campaign about the state of the public finances.”

Hunt returned fire this morning when Sky’s Kay Burley asked for his reaction to being called a liar by his successor: “I'm disappointed more than anything else,” he said, guardedly.

In these opening skirmishes in the “battle of the Budgets”, Hunt seemed to hold his own. He argued that Reeves was, basically, making it all up as an excuse to ramp up taxes. He pointed out that the Office for Budget Responsibility had had all the numbers and everything was in the public domain. He said Reeves and her team had had “privileged” access to the civil service since January, as part of the usual pre-election courtesies.

What’s more, according to an indignant letter he issued soon after the Commons debate, Reeves had submitted formal estimates for public spending to parliament only days before, signed off by her and the most senior civil servants across Whitehall – with no mention of any £22bn “black hole”. Were those estimates wrong, asked Hunt, adding that “the Chancellor said she was presented with the state of the public finances immediately on arrival at the Treasury, yet still, weeks later, the government published estimates that she considers wrong”.

Quite a riposte, all that – and, for a while, all agreed how fortunate the Tories were that Hunt clung on to his Surrey seat and was able to deploy his deep knowledge and recent experience to see off Reeves’s spirited attacks.

Sadly for Hunt, however, it has since pretty much all gone wrong for him.

After the debate, on Monday evening, the OBR published its own letter, essentially siding with Reeves in her suggestion that Hunt’s Treasury had covered up the state of UK finances and its spending commitments, and accusing him of misleading them over the pressures on public spending when they produced their sensitive pre-election forecasts for the economy in March.

The Bank of England relies on these for its own decisions on monetary policy – and these fresh revelations could mean that the long-awaited interest rate cut on Thursday is probably now off.

Next, the former head of the civil service, Nick Macpherson, pointed out that Reeves’s access to the Treasury staff before the election wasn’t nearly as extensive as Hunt implied: “I feel for HMT officials. The rules precluded them sharing spending pressures with Ms Reeves ahead of the election; the current framework precluded them discussing the realism of spending plans with the OBR. The changes to the OBR charter announced today are a big step forward.”

Last, footnotes to Reeves’s own audit explain why she had to put imperfect and incomplete figures to parliament: “The government laid main estimates for 2024-25 before parliament on 18 July, the earliest available opportunity after the general election and considerably later than the usual timetable. These estimates were prepared before the general election, and the government was forced to lay them unchanged in order to allow them to be voted on before the summer recess. This was necessary to avoid departments experiencing cash shortages over the summer.”

So Reeves will come back with some fresh numbers when she has them. She should, in a spirit of transparency, have hinted at some point before this week that there was trouble brewing – but, strictly speaking, what she did was in line with parliamentary protocol. She attests that the final figures were only produced “over the weekend” before the Monday bombshell (albeit widely briefed to the media).

That leaves just one line of defence for Hunt, which is much more convincing – though embarrassing; that, as the man who had to clear up after the Liz Truss mini-Budget, he would not have just sat back and crashed the public finances. In the event that the Tories won the election, he’d have had to come back with a package of measures not so different to Reeves’s, with the major difference that he’d not have given the doctors their big pay rise. But would also have known he wasn’t going to be chancellor much longer, and that it was about to become someone else’s problem.

So Reeves, with some powerful allies, has won this particular battle. But there are even bigger and more difficult battles ahead.

Supermajority or not, cutting the pensioners’ winter fuel allowance will make for a huge parliamentary scrap, with a possible rebellion on the Labour benches that could make history. Electorally, victimising 10 million pensioners is quite simply madness, and will give the Tories and Reform an immediate and perhaps lasting political boost.

More broadly, the cuts Reeves is going to make to infrastructure investment are bound to impact growth adversely, and make Labour’s ambitions for the economy and living standards even harder to fulfil. Scrapping the planning laws won’t be enough to get the economy motoring.

The bottom line is, will she and Starmer be able to face the voters in five years and say they have achieved their manifesto promise to “secure the highest sustained growth in the G7 – with good jobs and productivity growth in every part of the country making everyone, not just a few, better off”? I wonder.

The solemn Labour pledge to implement the cap on the cost of social care promised in the election has already been summarily jettisoned – a grave move also with far-reaching electoral consequences. That much political and social damage for a saving of a measly £1bn? It seems disproportionate.

It’s very early days, of course, but I recall what Starmer said during the election campaign: “There will be no return to austerity.” Well, it feels very much like that is precisely what Reeves is busily engaged upon, whether it is the Tories’ fault or not. It is as though Reeves is so annoyed, she is taking it out on everyone else.

At any rate, Labour’s “decade of renewal” is off to a rough start.