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Downing Street denies claims Rachel Reeves misled public over Budget forecasts
Downing Street has rejected accusations that Chancellor Rachel Reeves deliberately misrepresented the UK's fiscal outlook before this week's Budget, following revelations from the Office for Budget Responsibility (OBR) that higher wage forecasts would offset productivity downgrades.
Reeves had repeatedly warned of a bleak economic picture in the lead-up to Wednesday's statement, citing weaker-than-expected productivity as a threat to her spending rules. However, an OBR letter to MPs, released Friday, disclosed that rising wages-unmentioned by Reeves-would help her meet fiscal targets.
The Conservatives accused Reeves of painting an "overly pessimistic" scenario to justify tax increases. Opposition leader Kemi Badenoch alleged the chancellor had "lied to the public" and called for her dismissal.
OBR letter contradicts Reeves' public warnings
In correspondence to the Treasury Select Committee, OBR chairman Richard Hughes revealed that on 17 September, he informed Reeves the public finances were stronger than assumed. A 31 October update confirmed the Treasury was on track to meet its core fiscal rule-avoiding borrowing for day-to-day spending-by a £4.2bn margin, though less than last year's £9.9bn buffer.
Despite this, Reeves emphasized productivity declines in a 4 November Downing Street speech, warning of "consequences for the public finances" due to lower tax revenues. On 10 November, she told BBC Radio 5 Live that sticking to manifesto pledges might require "deep cuts in capital spending."
The OBR later clarified that while productivity forecasts had indeed worsened, the impact would be "offset" by higher wages boosting tax receipts-leaving Reeves with sufficient headroom to meet her rules.
Government defends Budget choices amid tax rise criticism
A Treasury spokesperson avoided addressing the OBR's process but stated Reeves' decisions aimed to "cut the cost of living, reduce hospital waiting lists, and double headroom to lower debt costs." The Budget ultimately included £26bn in tax rises, primarily through a three-year freeze on income tax thresholds, pushing more earners into higher brackets.
"We did look at income tax and National Insurance-that was responsible, because we didn't know the size of the productivity downgrade."
Rachel Reeves, The Guardian
Reeves defended the measures as "fair and necessary," adding she refused to cut public services after voters "demanded change" in the election.
Conservatives allege 'smokescreen' for tax hikes
Shadow Chancellor Mel Stride accused Labour of omitting the wage forecast to "mislead" the public. "It was all a smokescreen," he said. "Labour knew they didn't need to raise taxes and break promises."
Prime Minister's spokesperson denied any deception, asserting Reeves had "set out challenges clearly" and that the Budget's increased fiscal headroom would provide "certainty and stability for business."
Key dates in the dispute
- 17 September: OBR tells Reeves finances are stronger than expected.
- 31 October: OBR confirms Treasury will meet fiscal rule by £4.2bn.
- 4 November: Reeves warns of productivity-driven revenue shortfalls.
- 10 November: Reeves suggests capital spending cuts may be needed.
- 27 November: OBR letter reveals wage growth offsets productivity downgrade.
