Britain’s wealthy must shoulder the burden of paying to rebuild the UK’s “creaky” public services, Rachel Reeves has said, as she warned Labour MPs that leadership speculation was bad for the country.

The chancellor said she had opted to increase taxes by £26bn in this week’s budget to improve schools, hospitals and infrastructure, rejecting calls to “cut our cloth accordingly” after a downgrade in productivity forecasts.

However, she has been mired in a row with the Office for Budget Responsibility (OBR), which cast doubt on claims that she had dropped plans to raise income tax because of more optimistic forecasts. The body pointed out that she knew about the forecasts well before she had a change of heart.

In an interview with the Guardian, Reeves defended her decision to tax and spend at the budget, saying she had made “fair and necessary choices”.

She said: “I wasn’t willing to cut public services, because people voted for change at the election.”

Reeves added: “People often talk about what chancellors do in their budget, but sometimes what’s more important are the things you don’t do. One of the things I didn’t do was cut the investment that I put into capital spending, new schools and hospitals, new energy infrastructure, rail infrastructure.

“It would have been the easiest thing to do to say the OBR’s done this downgrade, you need to cut our cloth accordingly.

“But we’ll never get out of this problem of weak growth unless we’ve got investment in the economy, and we’re investing in things to boost our productivity.

Rachel Reeves in her office at No 11 Downing Street on Friday. Photograph: Linda Nylind/The Guardian

“When you’ve got creaky infrastructure, you’re not able to get the productivity benefits. So you know what, I’ve chosen to protect public spending in the budget.”

After a turbulent few weeks, during which Labour MPs have privately questioned the political futures of both Reeves and Keir Starmer, she played down the prospect of ambitious colleagues challenging the prime minister.

“I just don’t think it is a mainstream thing in the parliamentary Labour party,” she said.

“They want Keir to succeed. They want this government to succeed. We all know what happened in the last government, when they went through leaders and chancellors. It was bad for the country.”

Reeves argued that anyone who took over at the Treasury would confront similar challenges. “Whoever is chancellor would face the same … volatility in the global economy, and probably most importantly, the dire inheritance.”

With taxes on course to hit a historic high, she declined to say if they could climb further in future. She denied that working-age people were being asked to carry more of the burden than pensioners.

She said: “It’s quite clear that the economic burden in the budget was not about age. It was about wealth. People who bear more of the burden are those with big incomes and assets … so I don’t accept that.”

The chancellor also rejected the idea the government had put up taxes to pay for benefits, although she did fund U-turns on welfare and winter fuel cuts, and lift the two-child benefit cap, at a cost of £3bn a year.

“I don’t think there are many people who think it is reasonable that children grow up in poverty,” she added.

However, Reeves faced questions on Friday over Treasury claims that there was a hole in the public finances even though official figures showed it did not exist. The Conservatives accused her of misleading the public.

Speaking before the OBR’s intervention, Reeves confirmed that the option of raising income tax rates had remained on the table until well after she had made a speech in the budget run-up in which she highlighted the challenges posed by the downgrade in productivity forecast.

“We did look, as everyone knows, at income tax and national insurance, that was a responsible thing to do, because we didn’t know the size of the downgrade, the productivity,” she said.

After the Treasury had submitted its most important policies to the OBR, “they then update their forecasts, both for growth, for wages. So all of those things moved around,” she added.

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The chancellor defended the OBR despite criticism from others in parliament. Photograph: Linda Nylind/The Guardian

A Treasury source said: “Was this down to political pressure? The answer is no. The OBR confirmed the £16bn hit to headroom and the chancellor was clear on the need to increase headroom. That ambition did not change.”

Reeves said the leak of the OBR forecasts just before the budget had been “a bit of a scary moment” as it could have significantly affected the markets. “My worry was that the budget is a story as well as a set of numbers … but in the end it was, I think, OK.”

She was sitting in the Commons for PMQs when she first sensed something was going on, with opposition MPs looking at their phones. The chief secretary to the Treasury, James Murray, shared the news and then a series of notes were passed to and from officials preparing her response.

The chancellor, however, said she still had confidence in Richard Hughes, the head of the OBR, and also defended the independent budget watchdog despite criticism from some inside government.

“It is right that we have an independent forecaster. I don’t think it would be fair on Treasury officials to prepare a forecast and all the policies. That’s why, when I was in opposition, and consistently through my time as chancellor, I’ve spoken about the importance of independent economic institutions.”

MPs are also concerned about the government ditching a flagship policy that would have given workers the right to claim unfair dismissal after their first day on the job, in clear breach of Labour’s manifesto.

Reeves denied the move was needed to smooth over the government’s increasingly tense relationship with business after decisions on national insurance contributions and the minimum wage.

She said: “Workers’ rights is good for growth. I don’t buy this idea that poor rights for workers is good for our economy.

“This was about actually getting this legislation passed. We’re in this impasse at the moment where for months, this bill has been going backwards and forwards, and we want to get this bill passed, otherwise no rights are enhanced.”

Reeves did not say how the government would pay for special educational needs and disabilities (Send) in England, after saying she would take over full responsibility for costs from councils.

But she said that plans for reform, expected early next year, were not focused on savings but on improving the system, amid concern that MPs could oppose changes if they felt they were simply a cost-saving exercise.

“All of us in government know, all of us as parents know that the Send system is not working for children, parents, schools. Whenever I go to schools in my own constituency, they talk about just how badly the system is letting people down.

“So the reform is not focused on money. The reform is focused on making the system work.”