Evidence shows Reeves repeatedly cited a Budget gap even as official forecasts showed a surplus
Rachel Reeves is struggling to defend her position after repeatedly making false claims about a large Budget black hole in the public finances. The Chancellor insisted that Britain faced a multibillion pound gap that needed filling, a claim used to justify a thirty billion pound package of tax rises. However, the Office for Budget Responsibility told her that no such deficit existed and that the public finances were in surplus before new policy measures were taken.
The Telegraph has examined each instance in which Reeves and Treasury sources suggested that a major fiscal hole existed, even though the Office for Budget Responsibility consistently provided forecasts showing that she had headroom. The watchdog’s last estimate before the Budget indicated a surplus of four point two billion pounds.
The first misleading claim surfaced in late September during a briefing to ITV News. Robert Peston reported that Treasury sources believed they needed to raise thirty billion pounds in taxes. The suggestion was that it would be difficult to find such sums without harming growth. In reality, the Office for Budget Responsibility had told the Treasury that the initial shortfall was only two and a half billion pounds and that this figure was revised away soon after. Updated forecasts on twenty October predicted a surplus of two point one billion pounds, which grew to four point two billion pounds on thirty one October.
A second claim appeared in late October when the Financial Times reported that Reeves faced a severe productivity downgrade from the Office for Budget Responsibility. A Labour official told journalists that there was fury inside the Treasury about the timing of the adjustment, with suggestions that it would leave a twenty billion pound hole. Yet the downgrade had already been shared with officials in early August and its impact was relatively minor. It was offset by higher wages and inflation. At the time of the briefing the forecast showed that Reeves had two point one billion pounds of headroom.
Reeves delivered a breakfast television press conference on four November in which she hinted at the need for higher taxes. She implied that the Office for Budget Responsibility forecasts were worse than previously thought and stressed that decisions on tax and spending were required to avoid austerity. However, by this point the watchdog had already upgraded its forecasts. On thirty one October it told the Treasury that there was a four point two billion pound surplus.
Another false claim came during an interview with the BBC on ten November. Reeves argued that sticking to Labour’s manifesto commitments on tax would require deep cuts in capital spending. She implied that the state of the forecasts made these reductions unavoidable. Yet the Office for Budget Responsibility had already forecast a surplus of four point two billion pounds, meaning that her claim was not accurate.
A further incident occurred on fourteen November when reports emerged that Reeves and Sir Keir Starmer planned to abandon a two pence rise in income tax. Treasury sources suggested the change was due to improved forecasts. In fact, the improved forecasts had been known since early October. The Treasury had been aware that the surplus existed before any final decisions were made.
Reeves repeated the same narrative in a post Budget interview with the Guardian on twenty eight November. She said she had considered raising income tax and National Insurance because she did not know the size of the productivity downgrade. However, the Treasury had known about the downgrade since August and had known about the surplus since early October.
Across each of these episodes the facts remained unchanged. The Office for Budget Responsibility had given the Treasury consistent information showing that the Chancellor had headroom. The claims that Britain faced a multibillion pound deficit were false and used to justify tax rises that Reeves wanted for other reasons.