Chancellor Rachel Reeves faced mounting pressure on Sunday to resign over accusations she misled the public about the UK's finances to justify £26 billion in tax increases. The controversy centers on a critical discrepancy: the Office for Budget Responsibility had privately told her the fiscal shortfall was eliminated weeks before she publicly warned tax rises were necessary.
The row intensified after the OBR revealed it informed Reeves as early as September 17 that an improved tax take meant the budget shortfall was smaller than expected. By October, officials told her the shortfall had been eliminated entirely, with a £4.2 billion surplus projected before policy changes. Yet on November 4, Reeves delivered a speech suggesting tax rises were needed because Britain's productivity was "weaker than we previously thought" with "consequences for the public finances."
Tory leader Kemi Badenoch accused Reeves of lying to justify record tax hikes. "She sold her 'Benefits Street' Budget on a lie," Badenoch said, demanding Reeves's resignation. "Honesty matters... she has to go."
Shadow Chancellor Sir Mel Stride has written to the Financial Conduct Authority requesting an investigation into potential "market abuse," arguing the Treasury's misleading briefings created market volatility during a sensitive period for interest rate decisions. "Investors, businesses and ordinary families will have taken decisions based on briefings from HM Treasury and public statements by ministers which we now know to have been misleading," Stride wrote.
Internal Labour Concerns
The controversy has triggered rare public criticism within Labour's own ranks. A senior Labour figure told The Telegraph: "This looks pretty bad. Keir made a point of being more involved in the Budget from the beginning, and now it appears the story from the Chancellor is not what the OBR is saying. There are clearly questions for Keir and Rachel to answer." Another MP added: "It's hard to see how they come back from this."
Former Chancellor Nadhim Zahawi called for Reeves's resignation, stating: "She has to resign; her position is becoming untenable by the minute. She lied about the black hole, and she has sacrificed economic growth in favour of her misguided backbenchers."
Paul Johnson, former director of the Institute for Fiscal Studies, said Reeves's November briefing "probably was misleading." He told The Times: "It was designed to confirm a narrative that there was a fiscal hole that needed to be filled with significant tax rises. In fact, as she knew at the time, no such hole existed."
Starmer Stands Firm
Prime Minister Keir Starmer remained firmly behind his Chancellor, with Downing Street insisting there was "no attempt to deceive in any form." A Number 10 source said: "No 10 was aware of the content of the speech, which we believe entirely accurately outlined the need to raise revenues. The idea that there was any misleading going on about the need to raise significant revenue as a result of the OBR figures, including the productivity downgrade they contained, is categorically untrue."
The government's defense rests on the argument that the OBR surplus did not account for additional spending commitments, including a U-turn on winter fuel payments costing £1.25 billion, a retreat on welfare cuts costing £5 billion, and scrapping the two-child benefit cap at £3 billion. A No 10 source called the surplus "not a real surplus" once these costs were factored in.
Starmer is scheduled to deliver a speech on Monday backing the Budget and outlining plans to accelerate growth "further and faster."
TV Grilling
Reeves faced tough questioning during Sunday morning interviews. On Sky News, presenter Trevor Phillips confronted her with her own words from last year, when she insisted "we don't need to come back for more" on taxes. "That wasn't true," Phillips said. When asked directly if she had lied, Reeves responded: "Of course I didn't."
On the BBC, Laura Kuenssberg interrupted the Chancellor during what she deemed a bland response, warning her answer would make viewers "fall asleep in their cornflakes." Kuenssberg pressed Reeves on whether she had given the impression there was "no choice" and the government was "short on cash" before the Budget.
Labour sources acknowledged the political damage, with one noting: "Rachel is inextricably tied to Keir Starmer and vice versa" - suggesting removing her "would bring down Sir Keir as well."
Note: This article was created with Artificial Intelligence (AI).
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