Rachel Reeves has responded to claims that she misled the public over the size of the fiscal “repair job” she faced while laying out her November Budget.
This came after the Conservatives claimed that the pessimistic financial forecast Reeves laid out ahead of the Budget was inaccurate, after the Office of Budget Responsibility (OBR) released data to show it was not as bad as feared.
On Sunday morning, the Chancellor said that “of course” she did not lie to the public with her forecast at the start of the month.
She said, “Anyone who thinks that there was no repair job to be done on the public finances, I just don’t accept that.
“We needed to build more resilience, more headroom into our economy. That’s what I did, along with that investment in the NHS and cutting bills for families.”
In the weeks leading up to the budget, it was speculated that Ms Reeves would be preparing her budget around a gloomy economic forecast from the OBR.
These predictions were fuelled further when the Chancellor flagged that weaker productivity in the UK economy had “consequences for the public finances” in the medium of “lower tax receipts”, in a Downing Street address on November 4.
This was met with criticism from Conservative leader Kemi Badenoch, who said this was “misleading”, given the OBR had already shown her data to indicate that the situation was not as negative as previously anticipated.
When the OBR did publish its results, it found that lower productivity had knocked £16 billion off expected tax receipts, and a significant chunk of this was balanced out by inflation and higher wage growth, resulting in a surplus of £4.2 billion against Ms Reeves’s borrowing rules.
However, on Sunday, she highlighted that this would still have been the lowest window of headroom that any chancellor had to play with.
Additionally, she said this did not factor in policies, such as the abolition of the two-child benefit cap, which is forecasted to take 450,000 children out of poverty, her U-turn on cutting winter fuel payments, or her welfare reform.
Speaking to Sky News’s Sunday Morning With Trevor Phillips show, she said: “If I was on this programme today and I said I’ve got a £4.2 billion surplus, you would have said, and rightly so, ‘that is not enough, Chancellor’.”
She also pointed out: “In the context of a downgrade in our productivity, which cost £16 billion, I needed to increase taxes, and I was honest and frank about that in the speech that I gave at the beginning of November.”
The Chancellor also highlighted that – if not for the productivity downgrade - she would have had a headroom window of £20 billion to work with, minus the amount she would need to pay for welfare.
The Tories and the SNP have written to the Financial Conduct Authority demanding an investigation into the Chancellor’s comments, as well as policy leaks ahead of the Budget.
Nigel Farage, leader of Reform UK, has called for Sir Keir Starmer to investigate potential breaches of the ministerial code, which compels ministers to “give accurate and truthful information to Parliament” and be “as open as possible with Parliament and the public”.
Writing to Sir Laurie Magnus, Mr Farage alleged that Ms Reeves committed “a sustained and deliberate narrative advanced across multiple platforms, after the OBR forecasts were known to the Treasury, and in circumstances where the existence of fiscal headroom was not being disclosed to Parliament or to the public”.
