Budget 2025: Reeves Accused of Making the Economy Look Worse Than It Was

Rachel Reeves is facing accusations that she misrepresented the condition of the public finances in the weeks before the budget. Critics say she painted a far gloomier picture than the one presented to her privately by the Office for Budget Responsibility.

A letter released by the OBR shows that by the middle of September it had already informed the chancellor that the twenty billion pound gap she had spoken about, which related to her own fiscal rule on day to day borrowing, was likely to be smaller than she thought. The watchdog later told her in October that the gap had not only closed, but that the government was actually on course for a surplus.

Despite that, Ms Reeves continued to warn the public that she would be forced into difficult decisions. Those warnings set the stage for Wednesday’s budget, which raised taxes by more than twenty six billion pounds. They also included a dawn news conference on four November, after she had been told the gap had closed, when she suggested it might be necessary to break a manifesto promise and increase income tax in order to secure the country’s financial stability.

In the end, income tax rates were left unchanged in the budget. However, the chancellor did extend the freeze on income tax thresholds, something her opponents describe as raising taxes by stealth.

Kemi Badenoch, the Conservative leader, said the OBR letter proved Ms Reeves had betrayed the public’s trust and should lose her job. Downing Street rejected those claims and said the chancellor had been open about the difficulties the country faced and had explained her decisions clearly.

The OBR published a table setting out the dates of its forecasts and their conclusions. The Treasury had suggested earlier this month that improved projections were the reason income tax rises had been dropped. The OBR has now made clear that its last pre budget forecast was completed at the end of October and that nothing was altered in November.

Ben Zaranko from the Institute for Fiscal Studies questioned why ministers had spent weeks suggesting the nation’s finances were in such a precarious condition. Writing on X, he said that at no point did the OBR place the government in serious danger of breaching its fiscal rules which left him confused as to why a period of intense speculation about income tax rises was allowed to build.

He asked whether the aim had been to encourage everyone to expect a major rise in income tax, only for the chancellor to claim credit by not implementing it.

Ms Badenoch said the controversy showed that the budget was designed for political advantage rather than economic stability. She accused Ms Reeves of misleading the country in order to push through record tax rises and higher welfare spending.

Sir Mel Stride, the shadow chancellor, said the gloomy briefings ahead of the budget were nothing more than an attempt to disguise Labour’s real intentions. He argued that Labour knew all along they did not need to raise taxes to remain within their fiscal plans and said the OBR’s letter proved this point.