Downing Street has forcefully denied allegations that Chancellor Rachel Reeves misled the public or financial markets with stark warnings about a black hole in the public finances in the run-up to last week's Budget.
The Controversial Warnings
Chancellor Rachel Reeves signalled earlier this month that she might be forced to increase income tax to address a significant shortfall in the nation's finances. This potential £20 billion economic black hole, estimated by independent experts, dominated political discourse throughout November.
In a morning speech on November 4, widely interpreted as preparing the ground for tax rises, Ms Reeves emphasised the challenging economic situation facing the country. However, the following week, news leaked to the Financial Times that the Chancellor had abandoned the proposed income tax hike.
OBR Timeline Contradiction
The Office for Budget Responsibility (OBR) has since revealed in a letter to MPs on the Treasury Select Committee that it had informed the Chancellor in September that the financial gap would be substantially smaller than publicly suggested. More significantly, on October 31 - four days before Ms Reeves' speech - the watchdog confirmed the black hole had been filled and the public finances had moved into a small surplus.
"No changes were made to our pre-measures forecast after October 31," the OBR explicitly stated in its correspondence with Parliament.
Downing Street's Defence
When directly questioned about whether the Chancellor had misled the public, the Prime Minister's official spokesman offered a robust defence. "I don't accept that," the spokesman stated firmly.
The spokesman elaborated that Ms Reeves had clearly outlined the challenges facing the country and had been transparent about her decisions when presenting the Budget. Treasury insiders had previously suggested that improved forecasts from the OBR prompted the Chancellor to change course on tax increases.
Strained Treasury Relations
The revelation comes amid increasingly tense relations between the Treasury and the independent budget watchdog. The situation was further complicated on Wednesday when the OBR accidentally published key Budget measures over half an hour before Ms Reeves began her speech, creating temporary chaos in Westminster.
A Treasury spokesperson responded cautiously to the developing situation: "We are not going to get into the OBR’s processes or speculate on how that relates to the internal decision-making in the build-up to a Budget but the Chancellor made her choices to cut the cost of living, cut hospital waiting lists and double headroom to cut the cost of our debt."
The spokesperson emphasised the importance of maintaining "a private space for Treasury-OBR policy and forecast discussions" and welcomed the OBR's assurance that the premature publication would not become standard practice.
