Chancellor Rachel Reeves has dismissed assertions that she misrepresented the public’s understanding of the country’s finances in the lead-up to her Budget announcement.
During an interview, Reeves was pressed to clarify her frequent warnings about a potential reduction in the UK’s economic productivity forecasts, including remarks made on November 4, prior to Wednesday’s Budget.
It has come to light that the Office for Budget Responsibility (OBR) informed her in mid-September that the public finances were healthier than commonly believed, and that Reeves did not reference a projection of increased wages during her discussions.
Reeves asserted that the OBR’s data clearly illustrated there was “less fiscal space than there had been” and insisted she had been transparent regarding her decision-making process.
In response, Conservative leader Kemi Badenoch reiterated her call for the chancellor to resign. When questioned on the matter during a recent program, Reeves stated that she did not accept claims of having misled anyone.
Badenoch expressed dissatisfaction with Reeves’ denial on the same show, accusing the chancellor of creating an excessively grim portrayal of the public finances as a pretext for increasing taxes. Badenoch went as far as to claim Reeves had “lied to the public.”
Nevertheless, Downing Street refuted these allegations, and Prime Minister Sir Keir Starmer is expected to support Reeves’ fiscal choices in an upcoming speech, asserting that the chancellor’s measures would address cost of living challenges and contribute to decreasing inflation.
Reeves responded affirmatively when asked by Kuenssberg if she could be trusted, affirming her reliability. Kuenssberg went on to highlight what Reeves had stated on November 4, where the chancellor noted lesser financial resources than initially forecasted due to a drop in productivity and suggested a probable need to raise taxes.
Reeves clarified that, contrary to critics’ claims, she did not possess an additional £4 billion but instead saw a reduction in the OBR’s projected headroom from £9.9 billion in the spring to £4.2 billion in the autumn.
Headroom, a term used to describe surplus funds remaining after the government covers anticipated budget expenditures under its fiscal regulations, provides a safety net for unforeseen costs.
“I clearly could not present a budget with merely £4.2 billion in headroom,” she remarked, emphasizing that this would represent “the smallest surplus ever delivered by a chancellor,” justifiably attracting criticism for being too low.
She outlined her intention to bolster resilience, explaining her decisions aimed at increasing headroom to £21.7 billion.
When asked if she had inflated the predicament to facilitate a £16 billion rise in welfare, Reeves mentioned that she had also to consider policy choices made over the last six months regarding welfare and the Winter Fuel Allowance.
She stated, “I did express when those policies altered just before summer that we needed to secure those funds in the Budget, and I was very open about that.”
Furthermore, she acknowledged her decision to eliminate the two-child benefit limit was financed through hikes in online gambling taxes and through addressing tax avoidance and evasion, ensuring that it was fully costed and funded, thereby helping to lift half a million children out of poverty.
Questioned about whether she had breached the spirit, though not the letter, of her electoral promises concerning taxation by freezing income tax thresholds, Reeves replied: “I recognize I did not articulate this in the manifesto, but we have since encountered significant downgrades in the productivity forecast and major global instability.”
She added, “I must respond to all these developments, as a loss of control over public finances would lead to consequences.
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