Chancellor Rachel Reeves has firmly rejected accusations that she misled the public in the lead-up to last week's budget, amidst a growing political storm over her handling of economic forecasts from the Treasury's independent watchdog.
The Core of the Controversy
The row centres on whether Rachel Reeves overstated the damage to the UK's public finances from a productivity growth downgrade by the Office for Budget Responsibility (OBR). Opposition calls for her resignation have escalated since the OBR indicated the economic outlook was more positive than the chancellor's public statements suggested.
At the heart of the dispute is a timeline of events showing the evolution of the OBR's forecasts. In early August, OBR Chair Richard Hughes informed Reeves that a planned 0.3 percentage point reduction in productivity growth forecasts would reduce tax receipts by around £16 billion. This formed the basis of widespread reports of a looming fiscal hole.
A Shifting Fiscal Picture
However, the OBR's subsequent forecast drafts told a more nuanced story. By 31 October, the watchdog's final pre-measures forecast delivered to the Treasury showed the initial shortfall had been eliminated, replaced by a £4.2 billion surplus against the chancellor's day-to-day spending rule. This crucial boost was not made public.
For the following ten days, as speculation mounted over potential income tax rises, Reeves and Prime Minister Keir Starmer were aware of these improved underlying figures. The government ultimately abandoned a controversial plan to raise income tax by 2p on 13 November, a move that spooked financial markets.
In her budget on 26 November, Reeves announced £26 billion in tax rises, primarily through freezing thresholds, arguing this was necessary to repair the public finances and double her fiscal headroom to £20.7 billion.
Fallout and Denials
The controversy deepened when the OBR's budget details were leaked prematurely, prompting an inquiry. In a letter to the Treasury Committee, Richard Hughes outlined the forecast evolution to "address any potential misconceptions." He subsequently resigned after the inquiry blamed the OBR's leadership for procedural failures leading to the leak.
Appearing on the BBC, Rachel Reeves defended her actions. "I know that some people are suggesting that there was a small surplus," she stated. "But if I was on this programme today and I was saying a £4bn surplus is fine, there was no economic repair job to be done, I think you would rightly be saying that's not good enough."
Conservative leader Kemi Badenoch has called for Reeves to resign, alleging an attempt to deceive the public. The chancellor and her ministers maintain that the OBR's productivity downgrade necessitated tough decisions to ensure economic stability and resilience against future shocks.
