No 10 denies Reeves misled public in run up to Budget
Downing Street has denied that Chancellor Rachel Reeves misled the public about the state of the public finances in the run-up to this week’s Budget.
There were warnings ahead of the budget that Reeves could face a £20bn gap in meeting his no-borrowing rule for day-to-day expenses.
But in a letter to MPs the head of the Office for Budget Responsibility (OBR) said he had told the chancellor in mid-September that the difference would be much smaller.
Conservative leader Kemi Badenoch said the letter showed Reeves was “lying to the public” and should be sacked.
The weeks leading up to the budget have been dominated by speculation that the Chancellor will raise income tax rates and break the commitment made in the Labor Party manifesto.
On 4 November, Reeves made a rare pre-Budget speech in Downing Street, warning that the UK’s productivity was weaker “than previously thought” and that this “will also have consequences for the public finances due to lower tax revenues”.
He later told BBC Radio 5 Live on November 10: “It would of course be possible to stick to the commitments in the manifesto, but that would require things like big cuts in capital spending.”
These comments, along with his speech, fueled speculation that he would need to raise significant sums to meet his financial rules.
However, the Office for Budget Responsibility confirmed that before these two interventions, Reeves was told that the government was actually receiving higher tax revenues than expected, which offset the impact of the drop in productivity.
This meant that it had a surplus to meet both fiscal rules.
One Letter to the House of Commons Treasury select committeeOBR chairman Richard Hughes revealed that he had told the chancellor on 17 September that the public finances were in better shape than generally thought.
The letter also reveals that on 31 October the Treasury was on track to meet both of the Chancellor’s fiscal rules.
However, Reeves continued to state that there was a good chance he would raise income tax rates.
He told a Downing Street press conference: “It is already clear that productivity performance has been weaker than previously thought.”
He added: “What I want people to understand ahead of this Budget are the conditions we face.”
However, the Treasury later backed away from increasing income tax rates, with government sources claiming this was due to the OBR’s better-than-expected forecasts.
It has now emerged that OBR forecasts have not changed significantly in the run-up to the Budget.
Conservative shadow chancellor Sir Mel Stride said: “We now know the truth.
“Rachel Reeves spent the months leading up to the budget claiming that she would have to make difficult choices because of a downgrade in economic forecasts that she did not make.
“He even let it be known that he was considering increasing income tax rates.”
He claimed it was “a complete smokescreen”, adding: “It appears the country was deliberately misled.
“In doing so, some people may have been faced with higher mortgage rates due to the impact of Labour’s chaotic briefings on markets.”
The Prime Minister’s spokesman said, “I do not accept this,” when asked whether Reeves misled the public and financial markets.
He added: “Like that [Reeves] “In his speech here (Downing Street) he talked about the challenges facing the country and made his decisions incredibly clear in the budget.”
The Prime Minister added that the government was increasing the Treasury’s scope to meet fiscal rules, which would create “certainty and stability for business”.
