Chancellor Rachel Reeves says she can be trusted with the country's finances and has been “clear” about the reasons for her decisions following claims she misled the public in the lead-up to her Budget.
In a BBC One interview with Laura Kuenssberg on Sunday, Reeves was asked to explain why she has repeatedly warned of a downgrade in UK economic productivity forecasts.
It later emerged that the Office for Budget Responsibility (OBR) had told her in mid-September that the public finances were in better shape than widely believed.
When pressed on the issue, she said she did not “agree” it was misleading and said she had remained “candid” about all her plans both last week and in the run-up to the general election.
Conservative leader Kemi Badenoch, also speaking on the programme, said she was not satisfied with the chancellor's refusal and called for her to resign.
The Conservatives accused the chancellor of creating an overly pessimistic view of the public finances as a “smokescreen” for tax rises, with Badenoch saying Reeves had “lied to the public”.
Downing Street denies it misled the public and Prime Minister Keir Starmer is expected to do so. supported her budget decisions in a speech on Monday, saying the chancellor's decisions would help tackle pressure on the cost of living and reduce inflation.
Opening the interview, Kuenssberg asked Reeves if she could be trusted, and the chancellor replied: “Yes.”
Kuenssberg then laid out what the chancellor said in her speech on November 4, when Reeves announced that lower productivity means there is less cash on hand than previously forecast and she will likely have to raise taxes as a result.
Reeves explained that despite what critics said, “I didn't have $4 billion to spare” and instead the OBR figures were downgraded from £9.9 billion in the spring to £4.2 billion in the autumn.
“I clearly could not implement a budget with just a £4.2 billion reserve,” she said, as it would be “the lowest surplus the Chancellor has ever proposed” and she would “rightly” be criticized for having too little reserve.
She said: “I was clear that I wanted to improve that sustainability and that's why I made these decisions to increase the stock to £21.7 billion.”
Asked whether she had exaggerated the situation to pave the way for a £16 billion welfare increase, Reeves said she also had to take into account policy decisions made over the previous six months regarding social security and the winter fuel allowance.
She said: “When this policy changed just before the summer, I said we would have to find this money in the budget, so I was very open about it.
“Yes, I made a decision in the budget to abandon the two-child system. [benefit] limit – it was funded by increasing taxes on online gambling and by tackling tax evasion and evasion, fully timed and fully funded, and lifted half a million children out of poverty.”
When asked live on television: “Did you lie?” This was never a comfortable question for the Chancellor after approving a truly significant budget.
But the reason the challenge was launched was because of accusations from the Conservatives and others that Reeves had painted a misleading picture during the Budget about the state of Britain's finances.
Reeves' position was to not acknowledge this and insist that the UK economy had been overhauled downwards and it had decided to raise taxes to put some money aside for a rainy day – trying to bring more stability to financial markets in the hope that this would lead to lower interest rates.
Asked whether she had broken the spirit, if not the letter, of her manifesto tax commitments by freezing income tax thresholds, Reeves said: “I admit I didn't say so in the manifesto, but we have since faced both a significant downgrade in the productivity forecast and enormous global turbulence.”
She added: “I have to respond to all these things because if I lose control of public finances, we will be punished.
“Punished by financial markets that hold £2.6 trillion of national debt, and punished by higher interest rates, which will not only impact the country, but will also impact every business that borrows and every household with a mortgage.”
Appearing on the same show, Badenoch said she was “absolutely not satisfied” with Reeves' explanation, said she should have cut welfare spending instead and called for the chancellor to resign.
She said: “The Chancellor called an emergency press conference telling everyone how dire the state of the finances was and now we see the OBR telling her the complete opposite.
“She raised taxes to pay for Social Security – the only thing that wasn't funded was the Social Security payments she made, and she does it at the expense of a lot of people who work really hard and are getting poorer – and because of that, I think she should resign.”
Badenoch added that her shadow chancellor Mel Stride had written a letter of complaint to the Financial Conduct Authority asking for an investigation, accusing the chancellor of trying to “game her budget”, which could constitute “market manipulation”.
[BBC]
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