Rachel Reeves had to be asked twice whether she ‘lied’ to Britain about the choices she faced in the Budget today.
Amid rising fury at the way she softened up the public for monster tax hikes, the Chancellor initially dodged a straight question before insisting she had not deliberately misled anyone.
She insisted OBR’s downgrades were to blame for her decisions – even though the watchdog had in fact been informing her privately that there was no structural black hole in the finances.
Ms Reeves spent weeks before the fiscal package was unveiled talking up how the independent body had found a huge black hole in the books.
However, it has emerged that the OBR told her as long ago as September that productivity downgrades were being offset by better tax revenues.
In fact by the end of October Budget forecasts were showing her running a small surplus, with only Labour’s own political choices meaning that she needed to impose a massive package of tax hikes.
Ms Reeves told Sky News that the ‘big downgrade in productivity’ was the main factor in her decisions, saying it had a ‘big impact’ and ‘that’s why I had to ask people to contribute more’.
Ms Reeves admitted she did know that she was running a surplus when she gave an extraordinary breakfast-time speech talking up the grim state of the public finances.
But she denied ‘lying’ to the public about the situation, arguing that she needed a bigger buffer to avoid markets panicking about government debt.
Ms Reeves sparked shock from presenter Trevor Phillips by initially dodging a question on whether she had ‘lied’ to the public.
But pressed again she said: ‘Of course I didn’t.’
As the Chancellor desperately tried to save herself this morning:
- She dragged Keir Starmer into the chaos when asked if the premier knew about the financial forecasts in the run-up to the Budget. ‘Yes of course. We are a partnership,’ she said.
- Ms Reeves again tried to argue that the Labour manifesto had not been breached because tax ‘rates’ had not changed, despite admitting ‘working people’ will pay more. ‘We didn’t break the manifesto. We haven’t broken the manifesto,’ she said.
- Ms Reeves acknowledged her argument about a lack of headroom was partly because the OBR’s estimates of a surplus ‘didn’t include the policy choices that we had made between the Spring and the Autumn’.
- Downing Street has mounted a frantic operation to shore up the Chancellor, with Sir Keir due to hold a press conference tomorrow.
Rachel Reeves wriggled as she faced TV grilling amid mounting calls for her to quit over dire ‘Project Fear’ style warnings on the state of the public finances
Ms Reeves studiously avoided meeting the gaze of Tory leader Kemi Badenoch as they both prepared to be interviewed on the BBC this morning
Rachel Reeves is desperately defending her ‘lies’ about her Budget choices today as Keir Starmer tried to shore her up
A letter from the OBR to the Treasury Select Committee has been published spelling out the timetable of exactly what forecasts were provided to the Chancellor as she drew up her Budget package
Ms Reeves said: ‘In the context of a downgrade in our productivity, which cost £16 billion, I needed to increase taxes, and I was honest and frank about that in the speech that I gave at beginning of November.’
Sir Keir is due to hold a press conference tomorrow in which he will line up behind Ms Reeves, effectively intertwining their fates.
No10 sources have also risked fuelling the backlash by dismissing criticism as a ‘silly row brought about by people who can’t do maths’. The Tories have accused Ms Reeves of ‘lying’ to soften the country up for tax increases.
A poll for the Mail on Sunday has found 68 per cent of voters believe Ms Reeves should resign, with just 32 per saying she should stay.
Anger reached fever pitch on Friday after a letter from the OBR to the Treasury Select Committee was published.
In a highly unusual step, it spelled out the timetable of exactly what forecasts were provided to the Chancellor as she drew up her Budget package.
Asked whether Sir Keir was aware that the OBR had made clear that the true economic picture was rosier than had been painted, a No10 source said: ‘The Prime Minister and Chancellor worked together on the Budget, which made fair and necessary choices’.
Sources told the Telegraph that Ms Reeves’ comments had been ‘entirely accurate’ and Sir Keir was aware of ‘the content of the speech’.
Shadow chancellor Mel Stride has asked the Financial Conduct Authority for a full investigation ‘into possible market abuse by all those who would have had access to confidential information including at HM Treasury and 10 Downing Street’.
He suggested that markets could have been manipulated by knowingly false statements.
But Ms Reeves has flatly denied misleading the public, telling The Guardian that the tax raid was still ‘fair and necessary’.
As the Budget loomed, the Chancellor flagged that the OBR was downgrading productivity, as well as blaming everything from Brexit to Tory austerity and Donald Trump for a grim outlook.
Ms Reeves made a highly unusual ‘scene setter’ speech in Downing Street on November 4 hinting that she would have to breach Labour‘s manifesto promises not to increase income tax.
And six days later she gave an interview to the BBC in which she insisted that the only way to balance the books without an income tax hike was to cut ‘capital spending’ – something she made clear she was not willing to do.
However, the letter from the OBR to the Treasury committee revealed that it told Ms Reeves in September that revisions to tax revenues had almost completely offset a £21billion productivity downgrade.
By October 31 the watchdog said it had informed Ms Reeves that she was in fact meeting both her fiscal rules without the need for any action – giving her more than £4billion in headroom.
In the event the Chancellor announced an eye-watering £30billion package of tax rises on Wednesday, a large chunk of which went on benefits rises that had been demanded by mutinous Labour MPs.
She had already U-turned on the hints of income tax rises – if they were ever seriously considered – but only after the fact they were not happening was leaked to the Financial Times.
No10 and Treasury insiders have been pointing out that the OBR’s forecast of a surplus did not account for the U-turn on scrapping the winter fuel payment, or bowing to Labour MPs on abandoning welfare curbs and abolishing the two-child benefit cap.
Together those decisions cost the government around £10billion a year. Ms Reeves has also insisted she needed to rebuild the government’s headroom, an effective acknowledgment that the £10billion of space she left at her Budget last year was too small.
The Tories have accused Ms Reeves of ‘lying’ to soften the country up for tax increases
The OBR made clear it had told Ms Reeves as long ago as September that productivity downgrades were being offset by better tax revenues
