Chancellor says she can be trusted with the UK’s finances despite claims she misled the public

Chancellor Rachel Reeves says she can be trusted on the country’s finances and is “open” about the reasons for her decisions, following claims she misled the public in approaching the budget.

In an interview with Laura Kuenssberg on BBC One on Sunday, Reeves was pressed to explain why he had repeatedly warned against downgrading Britain’s economic productivity forecasts.

It has since emerged that the Office for Budget Responsibility (OBR) told him in mid-September that the public finances were in better shape than generally thought.

When pressed on the matter he said he “didn’t accept” it was misleading and kept all his plans “open” both last week and ahead of the general election.

Conservative leader Kemi Badenoch, who also attended the programme, said she was not satisfied with the chancellor’s denial and called on him to resign.

The Conservatives accused the Chancellor of giving an overly pessimistic impression of public finances as a “smokescreen” to raise taxes. Badenoch claimed Reeves was “lying to the public.”

However, Downing Street denied the accusations and Prime Minister Keir Starmer is expected to accept these accusations. He supported Reeves’ budget decisions in a speech He said on Monday the chancellor’s decisions would help tackle cost-of-living pressures and reduce inflation.

At the beginning of the interview, Kuenssberg asked if Reeves could be trusted, and the chancellor replied, “Yes.”

Kuenssberg then summarized what the chancellor said in a speech on November 4, when Reeves noted that he had less cash than previously anticipated due to a drop in productivity and would likely need to raise taxes as a result.

Reeves revealed OBR figures had been cut from £9.9bn in the spring to £4.2bn in the autumn, despite critics saying “I don’t have an extra £4bn to play with”.

Headroom is the term used for the money left over after the government covers expected budget costs, providing a financial buffer for unexpected costs.

“I clearly could not present a budget with only £4.2bn of headroom,” he said; for this would be “the lowest surplus any chancellor has ever made” and would “rightly” be subject to criticism for having too little headroom.

He said: “I’ve been clear that I want to increase that resilience and that’s why I’ve taken these decisions to increase that gap to £21.7bn.”

Asked whether he was overstating the case to pave the way for a £16bn increase in welfare, Reeves said he also had to take into account the policy choices made on welfare and the Winter Fuel Charge in the previous six months.

He said: “Just before the summer when these policies changed I said we needed to find this money in the Budget, so I’ve been very clear about that.

“Yes, I decided to give up the family of two children in the Budget [benefit] The cap – this has been funded by increases in online gambling taxes as well as cracking down on tax avoidance and tax evasion, fully costing and fully funding and lifting half a million children out of poverty.”

Asked whether he was breaking the spirit, if not the letter, of the tax return pledge by freezing income tax thresholds, Reeves said: “I know I didn’t say this in the manifesto, but since then we’ve had both a significant drop in productivity forecasts and major global turbulence.”

He added: “I have to respond to all this because if I lose control of the public finances we will be punished.

“Holding £2.6 trillion of public debt will be penalized by financial markets and punished with higher interest rates, which will not only affect the country, but every business that borrows money and every family with a mortgage.”

Badenoch, who appeared on the same show, said he was “absolutely” unhappy with Reeves’ statement and said he should cut welfare spending instead. He called on the chancellor to resign.

He said: “The Chancellor held an emergency press conference telling everyone how bad the financial situation was and now we have seen the OBR tell him the exact opposite.

“He was raising taxes for social welfare; the only thing that wasn’t funded was his welfare payments, and he’s doing it on the backs of a lot of people out there working hard and getting poorer – so I believe he should resign.”

Badenoch added that shadow chancellor Mel Stride had written a letter of complaint to the Financial Conduct Authority demanding an investigation and accusing the chancellor of trying to “step over his Budget” which could constitute “market manipulation”.