Chancellor says she can be trusted with UK finances despite claims she misled public

Chancellor Rachel Reeves says she can be trusted with the country’s finances and has been “clear” about the reasons for her decisions, following accusations she misled the public in the run-up to her budget.

In an interview for BBC One Sunday with Laura Kuenssberg, Reeves had to explain why he had repeatedly warned of a downgrade to the UK’s economic productivity forecasts.

It has since emerged that the Office for Budget Responsibility (OBR) told him in mid-September that the public finances were in better shape than previously thought.

When asked about the issue, she said she did not “accept” it was misleading and said she had been “frank” about all her plans both over the past week and in the run-up to the general election.

Conservative leader Kemi Badenoch, who also participated in the programme, said she was dissatisfied with the chancellor’s refusal and asked her to resign.

Conservatives accused the Chancellor of giving an overly pessimistic impression of public finances as a “smokescreen” for raising taxes. Badenoch claimed that Reeves had “lied to the public”.

But Downing Street has denied the allegations and Prime Minister Keir Starmer is expected to back Reeves’ budget decisions in a speech on Monday, saying the chancellor’s decisions will help address cost of living pressures and reduce inflation.

Opening the interview, Kuenssberg asked Reeves if she could be trusted and the chancellor replied: “Yes.”

Kuenssberg then described what the chancellor said in a speech on November 4, when Reeves indicated that there was less cash than previously anticipated due to lower productivity and that, as a result, she would probably need to raise taxes.

Reeves explained that, despite what critics said, he “didn’t have an extra £4bn to play with”, but rather the OBR figures had been cut from £9.9bn in the spring to £4.2bn in the autumn.

Headroom is the term for the money left over after the government meets its expected budget costs, providing a financial cushion for unexpected costs.

“I clearly couldn’t deliver a budget with just £4.2bn of leeway,” he said, as that would have been “the lowest surplus any chancellor has ever delivered”, and would have “rightly” faced criticism for the leeway being too small.

She said: “I was clear that I wanted to build that resilience and that’s why I made those decisions to get that margin up to £21.7bn.”

Asked whether he had exaggerated the situation to pave the way for a £16bn rise in welfare, Reeves said he also had to take into account policy decisions made in the previous six months on welfare and the winter fuel allowance.

She said: “When those policies changed, just before the summer, I said we would have to find that money in the budget, so I was very candid about that.

“Yes, in the budget I made the decision to eliminate the two-child system. [benefit] limit – which was funded by increases in taxes on online gambling and also by a crackdown on tax avoidance and evasion, fully costed and fully funded, and lifting half a million children out of poverty.”

Asked whether he had broken the spirit, if not the letter, of his manifesto commitment on tax by freezing income tax thresholds, Reeves said: “I acknowledge I didn’t say that in the manifesto, but since then we have had a significant downgrade in the productivity forecast but also enormous global turbulence.”

And he added: “I have to respond to all those things because, if I lost control of public finances, we would be punished.

“Punished by the financial markets holding £2.6 trillion of public debt, and punished with higher interest rates, which would not only affect the country but would also affect every company that borrows and every family that has a mortgage.”

On the same programme, Badenoch said she was “not at all” satisfied with Reeves’ explanation and should have cut welfare spending instead. He urged the chancellor to resign.

She said: “The chancellor called an emergency press conference to tell everyone how dire the state of the finances was and now we have seen the OBR tell her just the opposite.

“She was raising taxes to pay for welfare; the only thing that wasn’t funded were the welfare payments she had made, and she’s doing it at the expense of a lot of people who are working very hard and becoming poorer, and that’s why I think she should resign.”

Badenoch added that her shadow chancellor, Mel Stride, wrote a letter of complaint to the Financial Conduct Authority calling for an investigation, accusing the chancellor of trying to “campaign for her budget”, which could constitute “market manipulation”.