Economic with the truth: the mis-selling of the budget

The argument over the budget was not between 10 and 11 Downing St, but between the economic and the political, reports Rachel Sylvester

- Rachel Sylvester

On 23 September, the budget board - the joint No 10 and Treasury committee set up to shape last week's make-or-break financial statement - met for the first time in Downing Street. Minouche Shafik, the prime minister's newly appointed chief economic adviser, turned to Torsten Bell, the Treasury minister, and asked him to set the scene.

Speaking fast and furiously, Bell embarked on a foulmouthed tirade, laying bare the scale of the economic and political challenges facing the government. “It was ‘fuck this, fuck that, we've got to fuck them all and then we've got to fuck them some more,” one source said.

Lady Shafik, the courteous, well-spoken former deputy governor of the Bank of England, looked “completely shocked”, according to another senior figure who was present. “It was Torsten at his most excitable and pumped up. In the end, you did think: ‘Please, just stop talking?”

That meeting set the tone for the fractious, fraught and frenetic - or, in the words of one Labour peer, “absolutely fucking awful” - two months that followed. The buildup to this year’s budget was the most chaotic in living memory, beset by leaks, rows, U-turns and briefing wars. On Friday, the disarray continued as the Office for Budget Responsibility (OBR) revealed that when Rachel Reeves delivered her gloomy 8am “scene-setter” speech in Downing Street preparing the ground for tax rises, she already knew that the outlook for the public finances had in fact improved.

This is now a question of trust in the chancellor, as well as confidence in the financial markets. And there are real-world consequences. Andy Haldane, the former chief economist at the Bank of England, said the “circus” of budget speculation had “without any shadow of a doubt” had a direct impact on the economy.