U.K. Budget Leak Causes Chaos. How Markets Reacted to the ‘Complete Shambles.’

U.K. finance minister Rachel Reeves posed with the red Budget Box as she leaves 11 Downing Street to present the government’s annual budget to Parliament. (Carl Court/Getty Images)

Key Points

• The Office for Budget Responsibility prematurely published key budget details, causing a “serious error” and “complete shambles” in Parliament.
• Despite the leak, the market remained stable, with the British pound rising 0.2% and 10-year U.K. gilt yields falling 5 basis points to 4.45%.
• The government extended income tax threshold freezes until March 2028 and increased levies on property, mansions, and online gambling.

The U.K. government needed to deliver a zero-drama budget Wednesday, and exude enough political and economic credibility to fend off pressure from the voters and the bond market.

Instead, the annual financial statement descended into farce following an embarrassing leak, as the government’s own fiscal spending watchdog published key policies from the annual financial statement early by mistake.

The Office for Budget Responsibility broke protocol by publishing its forecast—revealing the key details of the budget—hours earlier than usual, and about 40 minutes before finance minister Rachel Reeves stood up to present the budget in Parliament.

Reeves began her statement by saying that the leak was “deeply disappointing” and a “serious error.” Kemi Badenoch, leader of the opposition Conservative party, went one step further calling it a “complete shambles” and demanded for Prime Minister Keir Starmer to launch a probe into how it happened.

“We apologise for this technical error and have initiated an investigation into how this happened,” the OBR said in a statement.

While Parliament was thrown into panic, the market wasn’t spooked. Ironically, the government drip-fed most of its fiscal policies to journalists in the weeks leading up to the budget. Tom Selby, director of public policy at the online broker AJ Bell, said the OBR error was “a fitting end to the most leaked fiscal event in living memory.”

The British pound climbed 0.2% to $1.32. The yield on the 10-year U.K. gilt fell 5 basis points to 4.45%.

As expected, the government extended a freeze on income tax thresholds until March 2028. Reeves also raised levies on income from property, mansions, and online gambling.

The OBR said that the measures would give the government more margin for error as it tries to meet its self-imposed fiscal rules. The rules state that by 2030, the budget should be on course for a balance or surplus, and debt should be falling as a share of U.K. economic output.

Reeves has been fighting for her political future as she struggles to address a cost-of-living crisis that has contributed to the ruling Labour party’s lack of popularity at the polls. In July, she cried in parliament after Starmer failed to back her at the weekly Prime Minister’s Questions political debate. The pound fell and yields rose in response.

Despite the leak, lawmakers will be happy that Wednesday didn’t bring about a repeat of ex-Prime Minister Liz Truss’ disastrous September 2022 mini-budget, where plans for unfunded tax cuts triggered a brutal bond-market selloff. Truss resigned the following month.

Reeves has probably saved her job for now—but the same may not be true for whoever at the OBR was responsible for Wednesday’s debacle.

Write to George Glover at george.glover@dowjones.com