The Financial Conduct Authority faces mounting pressure to launch a formal investigation into the Treasury's controversial Budget briefings about a supposed £20bn fiscal shortfall.
SNP demands market manipulation probe
Scottish National Party leader Stephen Flynn has formally requested the City regulator examine what he describes as "deliberately false and misleading" briefings from government officials about the state of public finances. In a strongly-worded letter to the FCA, Flynn suggested Treasury figures may have engaged in "market manipulation" by telling media outlets about a financial black hole that allegedly required filling through tax increases.
The controversy centres around media reports in early November that cited anonymous Treasury sources claiming Chancellor Rachel Reeves faced a £20bn fiscal gap. Several publications subsequently suggested income tax rises were imminent until the Financial Times revealed these plans had been abandoned approximately ten days after the initial press conference.
OBR reveals no shortfall existed
The SNP's intervention comes as the Office for Budget Responsibility delivered a stunning revelation: no shortfall in public finances actually existed at the time of Reeves' November 4 press conference. OBR chair Richard Hughes confirmed that as of October 31, the Chancellor was positioned to meet her fiscal rules by £4.2bn - directly contradicting the narrative of a £20bn hole.
During her early November "scene setter" speech, Reeves had strongly hinted that income tax rates would need to increase, citing costly productivity downgrades that supposedly forced her hand to raise additional revenue.
Budget briefings 'impacted financial markets'
Flynn's letter highlights serious concerns that Downing Street officials misled the public, noting that "Tory leader Kemi Badenoch accused the Chancellor of lying." More significantly, he argued the Chancellor's intervention and briefings about the non-existent £20bn Treasury black hole had substantial real-world consequences.
"That intervention from the Chancellor, alongside the briefings on the need to fill the non-existent £20bn Treasury black hole, had a significant impact on the financial markets, on business investment decisions, on foreign exchange rates and will likely have fed into the Bank of England decision-making around interest rates which took place two days after her speech," Flynn stated.
The SNP leader has called for an "immediate investigation into the accusations of false and deeply misleading Budget briefings emanating from a UK Treasury led by the Chancellor Rachel Reeves."
A Number 10 spokesperson has rejected suggestions that Reeves misled the public, asserting she was merely highlighting "the challenges the country was facing."
Economists divided on Budget approach
The controversy emerges alongside mixed reactions from leading economists regarding the Budget's handling of public finances:
- The Institute for Fiscal Studies claimed there was little "fiscal repair job" required given the Chancellor's headroom remained intact, though it warned that back-loaded tax rises represented "fiscal fiction"
- The Resolution Foundation suggested the fiscal "repair job" had been delayed, with the left-leaning think tank describing Budget policies as "deceiving"
- City economists have generally welcomed Reeves' extra £22bn headroom, though some institutions including Schroders have cautioned that further tax rises could materialise amid Britain's ongoing economic challenges
The FCA now faces a critical decision about whether to investigate allegations that Treasury briefings distorted market perceptions through claims about a fiscal shortfall that official data suggests never existed.
