Reeves speech did not mislead on challenges facing UK ahead of Budget, says OBR official

A political row has broken out over the information shared with the public over the past few weeks over the health of the economy and the choices required to be made by the chancellor.

Last week’s Budget included a total £26bn of tax rises, with £8bn set to be raised by extending the freeze on income tax and National Insurance thresholds for a further three years. The two-child benefit cap was also scrapped.

In the build-up to the Budget, Reeves repeatedly talked about a downgrade to the UK’s predicted economic productivity that would make it hard for her to meet her borrowing rules, fuelling speculation that the income tax rates themselves would be raised, which would break a Labour manifesto pledge.

On 4 November, she used a rare pre-Budget speech in Downing Street to warn the UK’s productivity was weaker “than previously thought” and that had “consequences for the public finances too, in lower tax receipts”.

However, it has since emerged that the OBR, which assesses the government’s tax and spending policies, had told the Treasury on 31 October that it was on course to meet its main borrowing rule by £4.2bn due to the downgrade in productivity being offset by higher wages, which increase the government’s tax receipts.

Reeves did not mention the downgrade being offset by larger tax revenues in her 4 November speech and subsequent press conference.

When questioned on whether the impression provided by the chancellor during her press conference was a “false one”, Prof Miles told the committee: “I don’t think it was misleading, for my own view, for the chancellor to say that the fiscal position was very challenging at the beginning of that week.”

He also said: “My interpretation was, and others might interpret differently, that the chancellor was saying that this was a very difficult Budget and very difficult choices needed to be made.

“And I don’t think that that was in itself inconsistent with the final pre-measures assessment we’d made, which, although it showed a very small positive amount of so-called headroom, it was wafer thin.”

The Conservatives have claimed Reeves gave an overly pessimistic impression as a “smokescreen” to raise taxes in order to increase welfare spending, with leader Kemi Badenoch claiming she “lied to the public”.