Budget 2025: Reeves accused of deliberately making UK finances look worse

Rachel Reeves has been accused of making the country's economic situation appear in a worse state than it really was ahead of the budget.

A letter from the Office for Budget Responsibility (OBR), published on Friday, revealed it told the chancellor as early as 17 September that prevailing economic winds meant the £20 billion gap in meeting her self-imposed fiscal rule of not borrowing for day-to-day spending would actually be much smaller.

Later, in October, it informed her that the spending gap had closed altogether and the government would be running a surplus.

Wednesday's budget, which increased taxes by more than £26bn, followed weeks of dire warnings from Ms Reeves that she would have to make "hard choices" to meet her tax and spending commitments.

This included an early morning news conference on 4 November, after the OBR told her the spending gap had closed, when she suggested she was likely to have to break a manifesto promise and raise income tax rates to secure the UK's economic future.

Ms Reeves did not end up increasing income tax rates in the budget. But the chancellor did extend the freeze on income tax thresholds, in a move that her critics have described as a stealth tax.

Conservative leader Kemi Badenoch said the letter showed Ms Reeves had "lied to the public" and should be sacked.

But Downing Street denied she had misled the public and the markets in the run-up to the budget.

"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."

Read more:
How much is the mansion tax and who will have to pay it?
The main budget announcements
Chancellor has backloaded the worst of the budget - and it's a gamble

The idea of a hike in income tax rates was dropped on 13 November after several weeks of being trailed, as the Treasury cited better than expected forecasts.

But the OBR suggested it had provided ministers with no new forecasting in November.

"No changes were made to our pre-measures forecast after October 31," the fiscal watchdog's letter to the Treasury Select Committee said.

Read more:
4 November: Reeves refuses to rule out manifesto-breaking tax hikes
11 November: Reeves signals she will break tax pledges

Ben Zaranko, an economist for the Institute for Fiscal Studies, queried the rationale behind the negative briefings ahead of the budget.

"At no point in the process did the OBR have the government missing its fiscal rules by a large margin. Leaves me baffled by the months of speculation and briefing," he wrote on X.

"Was the plan to lead everyone to expect a big income tax rise, then surprise them on the day by not doing it?"

Ms Badenoch said: "Yet more evidence, as if we needed it, that the chancellor must be sacked. 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."

Ms Reeves' Tory counterpart, shadow chancellor Sir Mel Stride said the downbeat briefings were "all a smokescreen".

"Labour knew all along that they did not need to raise taxes and break their promises," he said.

"It was an active choice to do so, to fund a huge increase in welfare spending. The OBR have now made that very clear.

"It appears the country has been deliberately misled."

(c) Sky News 2025: Budget 2025: Reeves accused of deliberately making UK finances look worse