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'Of course I didn't' lie about budget forecasts, Reeves said
Rachel Reeves said she “of course” had not lied about the state of the public finances before the budget. “Of course I didn’t,” she told Trevor Phillips.
Earlier, the chancellor had told his programme:
In the context of a downgrade in our productivity, which cost £16bn, I needed to increase taxes, and I was honest and frank about that in the speech that I gave at beginning of November.
Keir Starmer said on Thursday that Reeves’s £26bn tax-raising budget had “kept to our manifesto”, but conceded that Labour had “asked everybody to contribute” in the years ahead.
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Kemi Badenoch has reiterated her calls for the chancellor to resign on the BBC’s Sunday with Laura Kuenssberg programme. She has accused Reeves of breaking promises not to raise taxes (In Labour’s 2024 general election manifesto, it promised it would “not increase taxes on working people, which is why we will not increase national insurance, the basic, higher or additional rates of income tax, or VAT”).
Badenoch told the BBC this morning:
The chancellor called an emergency press conference telling everyone about how terrible the state of the finances were and now we have seen that the OBR had told her the complete opposite. She was raising taxes to pay for welfare.
The only thing that was unfunded was the welfare payments which she has made and she’s doing it on the backs of a lot of people out there who are working very hard and getting poorer. And because of that, I believe she should resign.
Badenoch added:
The shadow chancellor, Mel Stride, has written to the FCA (the Financial Conduct Authority). Hopefully there will be an investigation, because it looks like what she was doing was trying to pitch-roll her budget – tell everyone how awful it would be and then they wouldn’t be as upset when she finally announced it – and still sneak in those tax rises to pay for welfare. That’s not how we should be running this process.
Badenoch says the government has delivered a 'budget for benefits'
Conservative leader Kemi Badenoch has been interviewed by Trevor Phillips on Sky News. She said that Reeves’ budget has made the nation poorer and that she “should be resigning” having done a “terrible” job.
Badenoch said:
Every single thing that Rachel Reeves did in that budget makes all of us poorer. There are a lot of people out there who are struggling. Go and look at the farmers, for instance – we’re taxing farmers, many of whom are getting less than the minimum wage, to pay for benefits.
We are taxing everybody now to pay for benefits. This was a budget for benefits. That is not the chancellor’s job. That is not what she’s supposed to be doing. Benefits are supposed to be a safety net, they’re not supposed to make you middle-class.
We are at a point now where the rider is getting heavier than the horse, we cannot afford this, and we are leaving debts for our children. That is not fair.
Badenoch is calling for a reduction in the welfare bill, including around mental health benefits.
Reeves says that growth is the government's top priority
Laura Kuenssberg said it is no longer “credible” for the chancellor to say her number one priority is growth as the budget has made it more expensive for businesses to hire people and pushed up some business rates.
The OBR forecasts the economy will expand by 1.5% this year, higher than the previous estimate of 1%.
However, it lowered its growth estimates to 1.4% next year and 1.5% in all of the following four years.
Reeves insists that growth is the top priority for the government, pointing to recent investments in the UK by firms including JP Morgan in London and Goldman Sachs in Birmingham as positive signs.
She told the BBC:
(The OBR) has assessed productivity over the last 14 years as having been lower than they previously expected. Now, I don’t think that the Conservative legacy should define Britain’s future. But I have got to show we can beat those forecasts. We’ve beaten them this year … I am determined to beat those forecasts in the future.
Reeves says freezing tax thresholds was “the right thing” to do to safeguard spending commitments, and investment in the NHS.
I don’t accept that I misled the public, Reeves says
Reeves is being interviewed by the BBC’s Laura Kuenssberg. Rachel Reeves was told the Treasury “very deliberately” created the impression she had to put people’s taxes up to fill a “big gap in the public finances that simply didn’t exist”.
Asked if she misled the public in the run up to the budget by Kuenssberg, Reeves said:
I do not accept that at all. The OBR numbers themselves, which I agree with and we knew they were going to be published, they are very clear that there was less fiscal space than there was just a few months ago in the spring. And we needed not less but more fiscal headroom …
Kuenssberg interrupts to say the chancellor didn’t need an extra £26bn in extra taxes to fill the fiscal black hole.
Reeves added:
The numbers that you are using show that the headroom, the fiscal space, had deteriorated. That’s exactly what those numbers show … And of course, that didn’t include the policy choices that we had made between the spring and the autumn including on welfare and including on the winter fuel allowance …
I said when those policies changed just before the summer that we would have to find the money in the budget so I was very upfront about that.
Reeves was also asked about her decision to scrap the two child benefit cap from next April, which is estimated to cost £3bn a year by 2029-30.
The move, which came amid intense pressure from Labour backbenchers, was welcomed by campaigners and charities who argue it is the most cost-effective way to cut child poverty.
The two-child limit prevents parents from claiming child tax credit or universal credit for more than two children.
Asked whether the decision to remove the cap was in response to pressure from Labour MPs, Rachel Reeves told Trevor Phillips:
We’re choosing children. This lifts more than half a million children out of poverty, combined with our changes on free breakfast clubs, extending free school meals, 30 hours free childcare for working parents and preschool-age children …
The people I was thinking about were kids who I know in my constituency go to school hungry and go to bed in cold and damp homes, and from April next year those parents will have a bit more support to help their kids.
Reeves appears to back OBR chief despite watchdog's shock leak
Rachel Reeves’s much-anticipated budget was undermined after the Office for Budget Responsibility’s economic forecast appeared online about 40 minutes before she announced her policies to the Commons.
The chair of the Office for Budget Responsibility, Richard Hughes, has said he will continue to lead the watchdog unless he loses the confidence of the chancellor, the Treasury committee or parliament.
The OBR’s investigation into the leak is expected to report to the chancellor on Monday.
Asked if Hughes’ position is safe, Reeves said she will study the contents of the report tomorrow, but that she has a “huge amount of respect” for him and the budget watchdog.
She told Sky News:
We will get a report tomorrow, the report that looks at what happened about that budget leak. It was clearly serious. It was clearly a serious breach of the protocol, but I’ll see that report tomorrow.
'Of course I didn't' lie about budget forecasts, Reeves said
Rachel Reeves said she “of course” had not lied about the state of the public finances before the budget. “Of course I didn’t,” she told Trevor Phillips.
Earlier, the chancellor had told his programme:
In the context of a downgrade in our productivity, which cost £16bn, I needed to increase taxes, and I was honest and frank about that in the speech that I gave at beginning of November.
Keir Starmer said on Thursday that Reeves’s £26bn tax-raising budget had “kept to our manifesto”, but conceded that Labour had “asked everybody to contribute” in the years ahead.
Rachel Reeves is speaking to Trevor Phillips on Sky News. He started by replaying a clip of the chancellor saying last year that Labour would not increase taxes further in a future budget. He says her statements turned out not to be true.
Reeves defended this year’s budget by saying it “was not on the scale of the one last year”, adding that she had to ask people to “contribute more” because the “context” had changed.
Reeves said the OBR decided to do a review of productivity and said the watchdog’s productivity downgrade did not reflect anything the Labour government had done.
Chancellor to defend budget amid deepening row over deficit claims
Good morning and welcome to our live coverage of UK politics. The chancellor, Rachel Reeves, has become engulfed in a politically damaging row about what she told the public about the state of the British economy ahead of last week’s budget.
Reeves had claimed that a downgrade to the UK’s predicted economic productivity would make it more difficult to meet her self-imposed fiscal rules.
She used a speech on 4 November to suggest tax rises were needed because poor productivity growth would have “consequences for the public finances”. It was seen by many as an attempt to clear the way for breaching Labour’s manifesto letter of the pledge on income tax by raising rates.
But the Office for Budget Responsibility (OBR) – the budget watchdog – on Friday said it had informed the chancellor as early as 17 September that an improved tax take from growing wages and inflation meant the shortfall was likely smaller than initially expected, and told her in October it had been eliminated altogether.
The OBR’s disclosure has prompted opposition figures to urge the Financial Conduct Authority (FCA) to investigate whether the Treasury deceived the public. The Conservatives have accused Reeves of “market abuse”, which is a civil offence. No 10 has denied Reeves misled the public over the state of the country’s finances ahead of the budget.
The prime minister, Keir Starmer, is expected to give his backing to the budget in a speech tomorrow, saying it will help ease cost of living pressures and lower inflation, and will reportedly announce plans to go “further and faster” to encourage growth.
Reeves will be questioned about the row this morning on the broadcast rounds so stick with us for the latest developments.
