“Anyone who thinks that there was no repair job to be done on the public finances, I just don’t accept that.”
Rachel Reeves has defended her handling of the Budget as opposition figures claimed she misled the public over the size of the fiscal “repair job” she faces. In media interviews on Sunday morning, the Chancellor said she “of course” did not lie to the public when she set out a gloomy economic picture at the beginning of November.
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. 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.”
Pre-Budget speculation had suggested Ms Reeves faced a significant gap in her spending plans, partly due to a downgrade to productivity forecasts expected to be delivered by the Office for Budget Responsibility (OBR). The Chancellor herself fed that speculation in a speech in Downing Street on November 4 when she said weaker productivity had “consequences for the public finances” in the form of “lower tax receipts”.
Opposition politicians, including Conservative leader Kemi Badenoch, have claimed this was “misleading” 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 £16 billion off expected tax receipts, much of that was cancelled out by inflation and higher wage growth, leaving a £4.2 billion surplus against Ms Reeves’s borrowing rules.
But on Sunday, she pointed out this would have been the lowest headroom any chancellor had secured against their fiscal rules. It also did not take into account decisions such as the U-turn on cutting winter fuel payments or welfare reform, or the abolition of the two-child benefit cap, expected to take 450,000 children out of poverty.
She told Sky News’s Sunday Morning With Trevor Phillips show: “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 added: “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.”
Ms Reeves also pointed out that, without the productivity downgrade, she would have had £20 billion of headroom, excluding the money needed to pay for decisions on welfare. The Conservatives and the SNP have written to the Financial Conduct Authority calling for an investigation into policy leaks in the run-up to the Budget, and the Chancellor’s own comments.
On Sunday, Ms Badenoch told the BBC’s Sunday With Laura Kuenssberg programme that Ms Reeves should resign over her comments. She said: “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 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.”
Ms Reeves also defended her decision to abolish the two-child benefit cap, saying the Government was “choosing children”. She said: “The people I was thinking about were kids who I know in my constituency go to school hungry and go to bed in cold and damp homes, and from April next year those parents will have a bit more support to help their kids.”
Sir Keir Starmer is also expected to defend the Budget and the Chancellor in a speech on Monday setting out his long-term growth plans. The Prime Minister will say “economic growth is beating the forecasts” but the Government must go “further and faster” to encourage it.
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