By Ben Kerrigan-
The key criticism against the British Chancellor stems from a speech she made on November 4, where she emphasized a “productivity downgrade” and the need for “difficult choices” (tax rises), implying a large fiscal gap or “black hole”. It later emerged the independent Office for Budget Responsibility (OBR) had informed her as early as September and confirmed in late October that, due to higher-than-expected tax receipts, she in fact had a £4.2 billion surplus against her fiscal rules before any new policy decisions were implemented.
Some media commentators have also described her media appearances on the matter as “shifty and unconvincing”. Conservative’s shadow chancellor Mel Stride argues she crossed the line into being misleading and that had real-world implications for the financial markets. He’s written to the Financial Conduct Authority this weekend calling for a full investigation.
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Critics, including Scottish First Minister John Swinney, argue she deliberately made the fiscal situation sound “much graver than it actually was” to justify tax rises and build up a large £21.7 billion of fiscal “headroom” for unexpected costs. The Telegraph suggests this makes her no longer trustworthy.
Shifty Impression: Some commentators, like those from The Spectator and Sky News, noted that her media appearances defending her position at times came across as “shifty and unconvincing”.
Reeves and her supporters, including the Prime Minister and No 10, have strongly denied any deliberate misleading of the public.
The chancellor said she didn’t have any extra headroom as she rejects accusations of painting an overly gloomy picture of the economy
Reeves argues that a mere £4.2 billion surplus would have been the “lowest surplus any chancellor ever delivered” and left her vulnerable to any minor economic changes, which would have risked market instability. She maintains she was upfront about building greater “resilience” and stability in the economy, justifying the tax decisions.
No 10 has stated that the need to raise significant revenue was a direct result of the OBR figures, including the productivity downgrade they contained, and that the idea of misleading the public is “categorically untrue”.
Other Labour ministers have defended her actions, saying she inherited an economy in a “terrible state” and made “fair and necessary” choices to stabilise the economy and fund public services.
As Prime minister, Keir Starmer came to the defence of Chancellor Rachel Reeves, after she was accused of deliberately misleading parliament, stating that “there was no misleading”, the PM added that “there was a point at which we did think we’d have to breach the manifesto in order to achieve what we wanted to achieve… later on it became possible to do it without the manifesto breach”
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Conservative leader Kemi Badenoch called on Reeves to resign, and this morning accused the chancellor of giving a “Budget for benefits”
Chancellor Reeves job was as of yesterday deemed to be on the line after her actions stoked mistrust in her integrity concerning her budget announcement .
Reeves announced a series of tax rises, and extended a further three-year freeze of the thresholds at which people pay tax and higher income tax rates, meaning millions of people will be pulled in and have to pay more from their pay packets. She also scrapped the two-child benefit cap.
Reeves repeatedly talked about a downgrade to the UK’s predicted economic productivity that would make it hard for her to meet her borrowing rules, fuelling speculation that the income tax rates themselves would be raised, which would break a manifesto pledge.
She used a rare pre-Budget speech in Downing Street to warn the UK’s productivity was weaker “than previously thought” and that “has consequences for the public finances too, in lower tax receipts.”
Then, on 10 November, Reeves told the BBC: “It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending.”
The polity of the British economy became heated up ounce it emerged that the Office for Budget responsbility (OBR) had told the Treasury on 31 October that it was on course to meet its main borrowing rule by £4.2bn, although the figure was less than the £9.9bn buffer Reeves had left herself last year.
In a letter to the Commons Treasury select committee, OBR chairman Richard Hughes revealed that he also told the chancellor on 17 September that the public finances were in better shape than widely thought. Pressed by Trevor Phillips on Sky News about whether she lied to the public by not making it clear she had a £4bn surplus instead of a deficit, she hit back, saying: “Of course I didn’t”.
The reaction of financial markets has been closely watched in the run-up and aftermath of the Budget giving the impact the tax and spending policies could have on UK borrowing costs.
Many governments sell bonds, essentially IOUs – to raise money for public spending and in return they pay interest. The credibility of the market influences the government’s grasp of the economic market. Following Reeves’s Budget on Wednesday, the cost of government borrowing fell slightly, signalling a vote of confidence with the policy announcement.
Reeves announced a series of tax rises, and extended a further three-year freeze of the thresholds at which people pay tax and higher income tax rates, meaning millions of people will be pulled in and have to pay more from their pay packets. She also scrapped the two-child benefit cap.
Reeves repeatedly talked about a downgrade to the UK’s predicted economic productivity that would make it hard for her to meet her borrowing rules, fuelling speculation that the income tax rates themselves would be raised, which would break a manifesto pledge.
She used a rare pre-Budget speech in Downing Street to warn that the UK’s productivity was weaker “than previously thought” and that “has consequences for the public finances too, in lower tax receipts.” Then, on 10 November, Reeves told the BBC: “It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending.”
The polity of the British economy became heated up ounce it emerged that the Office for Budget Responsbility (OBR) had told the Treasury on 31 October that it was on course to meet its main borrowing rule by £4.2bn, although the figure was less than the £9.9bn buffer Reeves had left herself last year.
In a letter to the Commons Treasury select committee, OBR chairman Richard Hughes revealed that he also told the chancellor on 17 September that the public finances were in better shape than widely thought.
The SNP has also written to the FCA urging it to look into claims of “deliberately false and misleading” briefings.
Reports in the run-up to the Budget had suggested the chancellor could have faced a £20bn gap in meeting her tax and spending rules as a result of the OBR’s productivity downgrade.
“The chancellor called an emergency press conference telling everyone about how terrible the state of the finances were and now we have seen that the OBR had told her the complete opposite,” she said.
“She was raising taxes to pay for welfare.”
Reeves hit back at critics on Sunday with Laura Kuenssberg, arguing the £4.2bn headroom she had wasn’t an “extra 4bn to play with”, but rather a downgrade from the £9.9bn buffer she had last year.
“I clearly could not deliver a budget with just £4.2bn of headroom,” she said, as that would have been “the lowest surplus any chancellor ever delivered”, and she would “rightly” have been facing criticism for the headroom being too small.
Starmer’s support for Reeves appears to be at direct odds with the Office for Budget Responsibility (OBR), which said it told the Chancellor as early as October 31 that there was no longer a shortfall in the public purse. However, just days later, Ms Reeves gave a speech in Downing Street on November 4, saying she needed to raise taxes to plug a hole in the nation’s coffers.
During a round of media interviews this morning (Sunday), Ms Reeves defended her handling of the Budget as opposition figures claimed she misled the public over the size of the fiscal “repair job” she faces. Speaking to Sky News, the Chancellor said she “of course” did not lie to the public when she set out a gloomy economic picture at the beginning of November.
Ms Reeves told Sunday Morning With Trevor Phillips that the OBR’s investigation into the leak of its economic forecasts ahead of the Budget is expected to report to her on Monday. She added: “We will get a report tomorrow, the report that looks at what happened about that Budget leak. It was clearly serious. It was clearly a serious breach of the protocol, but I’ll see that report tomorrow.”
She added that she had “a huge amount of respect” for the OBR and its chairman, Richard Hughes, but stopped short of backing him to stay in his role.
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