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Ahead of the recent Budget announcement, Downing Street has firmly rejected claims that Rachel Reeves misled the public regarding the condition of the UK’s public finances. In the period leading up to the Chancellor’s statement on Wednesday, she repeatedly emphasized a downward revision in the country’s economic productivity forecasts, implying this would make it difficult to adhere to her spending rules. However, a letter sent to MPs on Friday by Richard Hughes, chairman of the Office for Budget Responsibility (OBR), disclosed a forecast for increased wages—a factor Reeves had not publicly mentioned—that would aid in meeting these fiscal targets.
The Conservative Party has criticized Reeves for presenting an unduly bleak picture of the financial situation, suggesting this was used as a cover for planned tax increases. Tory leader Kemi Badenoch accused her of having “lied to the public” and called for her dismissal. Hughes’ letter to the Commons Treasury select committee also revealed that as early as 17 September, the OBR had informed the Chancellor that the public finances were in better shape than generally perceived. Furthermore, by 31 October, the OBR reported to the Treasury that it was on track to comply with the key fiscal rule of avoiding borrowing for everyday spending, though with a narrower margin than the previous year.
Despite these reassurances from the OBR, Reeves continued to highlight the challenges posed by weaker productivity in a rare pre-Budget address on 4 November and in subsequent media interviews. She stressed the downward revision in productivity had knock-on effects for tax revenues and suggested significant spending cuts might be necessary to meet fiscal commitments. Yet, the OBR confirmed that increased wages could offset the productivity downgrade, maintaining that the government would still meet its fiscal rules.
A Treasury spokesperson declined to comment on the internal dynamics of the OBR’s budgeting process, emphasizing the Chancellor’s decisions to reduce the cost of living, decrease hospital waiting lists, and increase the Treasury’s fiscal “headroom.” Nonetheless, Reeves’ statements kept speculation alive that income tax rates might rise, although she eventually did not pursue an increase. Her Budget nevertheless included £26 billion in tax hikes, primarily through freezing income tax thresholds over three years, effectively pushing more taxpayers into higher brackets. Critics, including Conservative shadow chancellor Sir Mel Stride, accused Reeves of deliberately misleading the public by ignoring the positive impact of higher wage forecasts on the outlook, thereby justifying increased welfare spending under false pretenses. The Prime Minister’s spokesperson maintained that Reeves had clearly outlined the country’s challenges and policy decisions, affirming that the government’s increased fiscal headroom would provide stability and certainty for businesses
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