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.