Why Rachel Reeves is facing claims of ‘lying’ to the public before the budget
Why Rachel Reeves is facing claims of ‘lying’ to the public before the budget
The chancellor, who has been backed by the prime minister, has insisted ‘of course I didn’t’ lie. So, what is the row all about?
Rachel Reeves has denied opposition claims she “lied” about the state of the public finances ahead of her budget.
Opposition figures have alleged she misled the public over the size of the fiscal “repair job” she faced, with Tory leader Kemi Badenoch calling for her to resign.
Reeves, who has been backed by Sir Keir Starmer, has insisted “of course I didn’t” lie.
So what is the row about? Yahoo News UK explains…
Why has Reeves been accused of lying?
The chancellor is facing scrutiny over what she told the public and markets about the state of the economy in the run-up to her budget, which was delivered on 26 November.
There was pre-budget speculation she faced as much as a £20bn gap in meeting her fiscal rules, partly as a result of a downgrade in productivity forecasts.
Those rumours were fuelled by Reeves herself when she used a speech on 4 November to suggest tax rises were needed because poor productivity growth would have “consequences for the public finances”.
But on 28 November, two days after Reeves delivered her budget, the Office for Budget Responsibility (OBR) said it had informed the chancellor as early as 17 September that an improved tax take from growing wages and inflation meant the shortfall was likely smaller than initially expected – and told her in October it had been eliminated altogether.
Watch: ‘Of course I didn’t’ lie about state of public finances, Reeves insists
Opposition politicians have claimed Reeves was “misleading” the public as the OBR had already provided her with a forecast showing the situation was not as bad as feared.
While the OBR did deliver a productivity downgrade that wiped £16bn off expected tax receipts, much of that was cancelled out by inflation and higher wage growth, leaving a £4.2bn surplus against Reeves’s borrowing rules.
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But the chancellor defended herself in a series of interviews on Sunday (30 November), saying: “Anyone who thinks that there was no repair job to be done on the public finances, I just don’t accept that.
“We needed to build more resilience, more headroom into our economy. That’s what I did, along with that investment in the NHS and cutting bills for families.”
Reeves told Sky News the £16n productivity downgrade meant she needed to raise taxes and insisted “I was honest and frank about that in the speech I gave at the beginning of November”.
She made the point that the £4.2bn surplus would have been the lowest headroom any chancellor had secured against their fiscal rules.
That surplus also did not take into account the cost of the U-turn on cutting winter fuel payments or welfare reform, as well as the abolition of the two-child benefit cap.
What has the response been?
Conservative leader Badenoch said Reeves should resign, claiming she was trying to justify tax rises for her welfare measures, such as abolishing the two-child benefit cap, to appease unhappy Labour MPs.
Badenoch told the BBC’s Sunday with Laura Kuenssberg programme: “The chancellor called an emergency press conference [on 4 November] 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 was raising taxes to pay for welfare.
“The only thing that was unfunded was the welfare payments which she has made and she’s doing it on the backs of a lot of people out there who are working very hard and getting poorer.
“And because of that, I believe she should resign.”
Badenoch told GB News Reeves “knew exactly what she was doing” when she “told a lie” about the country’s finances in order to “send a signal to the markets” and to seek favourable treatment by the bond markets to “raise money for welfare”.
She said that if a CEO had behaved in the same way before giving an annual report, they would be facing potential jail time.
Writing on social media earlier in the week, Badenoch said: “For months Reeves has lied to the public to justify record tax hikes to pay for more welfare. Her budget wasn’t about stability. It was about politics: bribing Labour MPs to save her own skin. Shameful.”
The Tories and SNP have both written to the Financial Conduct Authority, calling for it to look into “misleading” comments from Reeves.
Meanwhile Reform UK leader Nigel Farage has urged the prime minister’s independent standards adviser, Sir Laurie Magnus, to look into potential breaches of the ministerial code.
The code demands ministers “give accurate and truthful information to Parliament” and are “as open as possible with Parliament and the public”.
In his letter Farage accused Reeves of “a sustained and deliberate narrative advanced across multiple platforms, after the OBR forecasts were known to the Treasury, and in circumstances where the existence of fiscal headroom was not being disclosed to Parliament or to the public”.
Is Starmer backing his chancellor?
Yes. Downing Street said “the idea that there was any misleading going on about the need to raise significant revenue as a result of the OBR figures, including the productivity downgrade they contained, is categorically untrue”.
And Starmer will use a speech on Monday (1 December) to support the decisions taken by Reeves in the budget and set out his long-term growth plans.
He will praise the budget for bearing down on the cost of living, ensuring economic stability through greater headroom, lower inflation and a commitment to fiscal rules, and protecting investment and public services.
Read more
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‘Why Did You Lie To The Country?’: Trevor Phillips Slams Rachel Reeves Over Budget Tax Row (HuffPost UK)
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Defiant Rachel Reeves says she will be Chancellor for years and pledges to ‘defy her critics’ (The Independent)
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Opinion: Reeves may have breached the ministerial code. She must be investigated (The Telegraph)
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