Rachel Reeves faced angry calls to resign last night after ‘lying’ to the nation in the run-up to the Budget.
In an extraordinary move, the fiscal watchdog yesterday revealed that the Chancellor was told months ago that there was no hole in the public finances.
Yet Ms Reeves continued to make grim warnings about the state of the economy ahead of Wednesday’s statement.
She even opened the door to an income tax hike in an unprecedented early-morning speech, all while plotting a mammoth welfare giveaway in her ‘Benefits Street Budget’.
Conservative leader Kemi Badenoch said the Office for Budget Responsibility’s revelation showed Ms Reeves had ‘lied to the public’ and she should be sacked.
Mrs Badenoch added: ‘For months, Reeves has lied to the public to justify record tax hikes to pay for more welfare.
‘Her Budget wasn’t about stability. It was about politics: bribing Labour MPs to save her own skin. Shameful.’ As the days ticked down to her financial statement, the Chancellor warned that the OBR was downgrading productivity while also blaming everything from Brexit to Tory austerity and Donald Trump for a ‘worse-than-expected’ outlook.
Neither she nor Treasury sources did anything to dispel claims of £30billion deficits that she would have to fill.
Rachel Reeves pictured outside 11 Downing Street in London on Wednesday before her Budget announcement
The Chancellor is now facing calls to resign after after ‘lying’ to the nation over a ‘black hole’ in public finances
The Chancellor pictured celebrating with a drink at the Two Chairmen pub after delivering her Budget
Yesterday, however, in a highly unusual action, the OBR published a letter revealing it had told Ms Reeves as early as September 17 that the downgrade was more than offset by a rise in tax revenues.
At the end of October, the watchdog then told her that she was sitting on a £4.2billion surplus – and on course to meet both of the Government’s fiscal targets.
But just four days later, the Chancellor gave a highly unusual press conference in Downing Street in which she spoke of the ‘challenges’ she faced ahead of the Budget.
She hinted that she would have to breach Labour’s manifesto promises not to increase income tax – a suggestion she repeated in an interview on November 10.
When the Chancellor stood up at the despatch box on Wednesday, she announced an eye-watering £30billion package of tax rises, 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.
The day after the volte-face, senior government figures were still privately insisting there was a £20billion black hole, suggesting a new OBR report had offered up an extra £10billion.
In an interview with the Guardian before the OBR’s letter was published, Ms Reeves confirmed that she did look at hiking income tax – claiming ‘that was a responsible thing to do, because we didn’t know the size of the downgrade, the productivity’.
The OBR letter sparked fury, with the Chancellor accused of ‘misleading’ the public and markets. Shadow Chancellor Sir Mel Stride also called for Ms Reeves to quit, telling the Daily Mail: ‘Rachel Reeves’ broken tax promises and the briefing debacle in the run-up to the Budget have had real consequences for our economy and for people across the country.’
Shadow Chancellor Sir Mel Stride called for Ms Reeves to quit over ‘broken promises’ and a briefing debarcle
At the end of October, Reeves was told by the OBR that she was sitting on a £4.2billion surplus
Reform deputy leader Richard Tice urged the Chancellor to ‘consider her position’, adding: ‘She has deliberately crashed the economy.’ Julian Jessop, of the Institute of Economic Affairs, a free market think-tank, branded the ‘scale of deceit’ from Ms Reeves as ‘shocking’.
‘The prolonged uncertainty ahead of the late Budget had clearly harmed the economy,’ he said. ‘But confirmation that the markets and the public had been misled throughout the process will do more permanent damage.
‘Some observers – myself included – have spent weeks pointing out the holes in the narratives coming out of the Treasury and No 10.’
William Yarwood, of the TaxPayers’ Alliance, accused the Chancellor of having ‘perpetrated a giant scam on British taxpayers’. Paul Johnson, a former director of the Institute for Fiscal Studies, said Ms Reeves’ November 4 press conference ‘probably was misleading’.
‘It was clearly intended to have an impact and confirm what independent forecasters had been saying, designed to confirm a narrative that there was a fiscal black hole that needed to be filled with significant tax rises. In fact, as she knew at the time, no such hole existed.’
One Treasury veteran told the Mail that playing ‘fast and loose’ with briefings would come back to bite the Chancellor. ‘HM Treasury cannot mislead media – they need to be trusted as their word may be needed to stop bad stuff happening,’ they said.
Downing Street insisted Ms Reeves had not misled the public or the markets. ‘I don’t accept that,’ the Prime Minister’s spokesman said. ‘As she set out in the speech that she gave here (Downing Street), she talked about the challenges the country was facing and she set out her decisions incredibly clearly at the Budget.’
A Treasury spokesman added: ‘We are not going to get into the OBR’s processes or speculate on how that relates to the internal decision-making in the build-up to a Budget, but the Chancellor made her choices to cut the cost of living, cut hospital waiting lists and double headroom to cut the cost of our debt.’
The OBR is itself under fire after its analysis of the Budget measures was leaked online before Ms Reeves had stood up for her speech. It has promised a report into the fiasco by Monday.
The public gave the Budget a thumbs down, with a YouGov poll finding that 21 per cent of voters thought it was fair overall, while 48 per cent said it was unfair. Just 11 per cent believe Ms Reeves is doing a good job, with 59 per cent saying she is performing badly.
