Chancellor Rachel Reeves has rejected calls for her resignation, denying she misled the public about the UK's finances to justify £26 billion in tax hikes. The denial comes after revelations that the Office for Budget Responsibility informed her of a budget surplus weeks before she publicly warned of a fiscal crisis.
Conservative leader Kemi Badenoch has demanded Reeves step down, accusing her of creating an "alternative reality" to push through tax increases. The row has triggered calls for a Financial Conduct Authority investigation into possible market manipulation.
The controversy centers on a significant timing discrepancy. The OBR informed the Treasury in mid-September that public finances were in better condition than generally believed, and by October 31 confirmed the government was on track to meet its borrowing targets with a £4.2 billion surplus.
Yet on November 4, Reeves delivered a speech in Downing Street warning of "consequences for the public finances" and citing weaker productivity forecasts that would lead to "lower tax receipts". She referenced a £16 billion productivity downgrade that required tax increases.
Reeves defends her decisions
Speaking on Sky News's Sunday Morning With Trevor Phillips, Reeves stood by her budget strategy. "If I was on this programme today and I said I've got a £4.2 billion surplus, you would have said, and rightly so, 'that is not enough, Chancellor'", she said.
She argued the £4.2 billion headroom would have been the lowest surplus any chancellor ever delivered against fiscal rules. "In the context of a downgrade in our productivity, which cost £16 billion, I needed to increase taxes, and I was honest and frank about that in the speech that I gave at beginning of November", Reeves told the programme.
The Chancellor said she deliberately built up fiscal resilience, increasing headroom from £9.9 billion in spring to £21.7 billion. She told broadcasters: "Anyone who thinks that there was no repair job to be done on the public finances, I just don't accept that."
Opposition calls for investigation
Badenoch accused Reeves of dishonesty on the BBC's Sunday With Laura Kuenssberg programme. "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. 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 added.
Shadow chancellor Mel Stride has written to the Financial Conduct Authority requesting an investigation into potential market abuse.
Both Conservatives and the SNP have formally complained about Budget-related leaks and Reeves' pre-Budget statements. Reform UK leader Nigel Farage told the Mail on Sunday: "We have a deceitful Prime Minister and Chancellor and both should go. Business has no confidence left in these two."
Starmer to defend Budget
Prime Minister Keir Starmer will deliver a speech on Monday defending both the Chancellor and the Budget. Downing Street confirmed the Budget board fully informed Starmer about pre-Budget economic developments and dismissed claims that Reeves misled voters.
A No 10 source said the Prime Minister and Chancellor worked closely on Budget decisions through regular meetings of a Budget board. Starmer's speech will praise the Budget for delivering "economic stability" and claim "economic growth is beating the forecasts".
Internal Labour tensions have emerged, with one Cabinet minister telling the Mail on Sunday that Reeves is in a perilous position. Former Labour minister Graham Stringer said: "Under similar circumstances, no Chancellor would expect to remain in office. [...]"
The fiscal picture
While the OBR did downgrade productivity forecasts by £16 billion, higher-than-expected inflation and wage growth largely offset this. The net result left Reeves with a £4.2 billion surplus under her borrowing rules before policy decisions on welfare spending, winter fuel payments, and the two-child benefit cap.
Reeves defended the decision to scrap the two-child benefit cap. The decision will lift 450,000 children out of poverty.
A Mail on Sunday poll found 68 percent of voters believe Reeves should resign, while 65 percent expect the Labour government to fall before its five-year term ends in 2029.
Note: This article was created with Artificial Intelligence (AI).
