Prime Minister Keir Starmer has denied allegations that Chancellor Rachel Reeves misled cabinet colleagues and the public regarding the state of public finances prior to the Budget. This follows speculation about a £30 billion shortfall in fiscal headroom, which influenced tax rumours.
At a press conference held at a nursery in London, Starmer supported Reeves’ tax measures and spending commitments, including lifting the two-child benefit cap, despite scrutiny over pre-Budget communications. He maintained that a productivity downgrade by the Office for Budget Responsibility (OBR) necessitated revenue increases and expressed surprise at the timing of the OBR’s growth review. “It was inevitable we would always have to raise revenue,” Starmer stated, adding, “There was no misleading.”
The Prime Minister also acknowledged that the government considered breaching Labour’s manifesto commitment not to raise income tax rates, though he did not elaborate on why this decision was ultimately not pursued. Questions about pre-Budget briefings and anonymous media quotes have placed Reeves and Starmer in a challenging position, with opposition parties, including the Conservatives and Reform UK, calling for Reeves’ resignation.
In correspondence to the Treasury Select Committee, OBR chair Richard Hughes confirmed there was no fiscal shortfall post-20 October, excluding abandoned welfare cuts, indicating the deficit was smaller than perceived. Allegations against the government include whether a £30 billion fiscal gap existed, with Reeves fuelling speculation about potential income tax hikes at a November press conference. Subsequent media reports suggested the tax increase plan was dropped due to improved forecasts, which the OBR later refuted.
BBC political editor Chris Mason reported that the Treasury misled the public based on provided and withheld information. Starmer attributed the revenue-raising necessity to the timing of the OBR’s productivity review, expressing surprise that trend forecasts weren’t revised before the last General Election. He emphasised the OBR’s crucial role in maintaining financial stability, stating, “I’m not angry at the productivity review. It’s a good thing to do them from time to time.”
Hughes is scheduled for a parliamentary hearing on Tuesday, which may reveal tensions between the Treasury and the OBR.
In a related development, Starmer’s speech in Central London outlined the government’s strategy to boost the UK economy, focusing on deregulation, welfare reform, and trade ties to enhance living standards. During the speech, Starmer confirmed acceptance of all recommendations from a significant review of nuclear power by economist John Fingleton, which highlighted planning inefficiencies. Business Secretary Peter Kyle will oversee reform implementation across other sectors.
The announcement has been praised by think tanks and advocacy groups supporting economic growth. Lawrence Newport of Looking for Growth commented, “Whilst there is more to do, today represents the biggest, most radical change to nuclear regulation in our country’s history. These reforms will transform our energy sector, allowing us to make more energy here and reduce bills for businesses and households across the country.”
