UK (Parliament Politics Magazine) – Rachel Reeves denies misleading voters over a supposed financial black hole, defending her Budget and confirming PM Keir Starmer knew about the fiscal shortfall.
As reported by The Telegraph, Chancellor Rachel Reeves insisted she did not mislead voters about the alleged black hole in government finances.
The Chancellor faces calls to resign after the Office for Budget Responsibility published a detailed report of pre-Budget discussions with the Treasury.
According to the findings, Ms Reeves and her team allegedly overstated the fiscal gap as they devised a £30bn tax raid, aiming to protect themselves and Sir Keir Starmer from backbench pressure on welfare spending.
What did Rachel Reeves say about the Budget and the alleged black hole?
During an interview on Sunday, when asked if she lied to the public about her autumn Budget, Rachel Reeves responded,
“Look, I’m a Labour Chancellor. I want to reduce child poverty. I make no apologies for that. This will be the biggest ever reduction for child poverty in a Parliament ever and I’m proud to be the Chancellor that lifts half a million kids out of poverty.”
Questioned again on misleading, she said,
“You also asked about welfare in that question.”
Pressed for a third time if she lied, she replied,
“Of course I didn’t.”
The Chancellor confirmed that Labour leader Sir Keir Starmer was aware of her decisions and comments from November 4.
She added,
“We are a partnership and we have a Budget board, the Prime Minister, Keir and myself met regularly to discuss the Budget and the choices because these are the choices of this Government and I’m really proud of the choices that we made to cut waiting lists, to cut inflation and to build up the resilience in the economy.”
Addressing Budget concerns in the interview, Ms Reeves defended her Budget, claiming it would help lower inflation.
When questioned why she had not explicitly framed the Budget measures as Labour policies, she said she focused on key objectives to ensure a resilient economy.
It was reported that Ms Reeves knew about the productivity downgrade ahead of her speech.
She stated,
“The biggest single factor for the lower tax revenues is the productivity downgrade but in addition to that the OBR said before the measures that I took in the Budget that inflation was going to be higher and that would result in higher tax receipts.”
The chancellor added,
“But that’s not a good thing because higher inflation, inflating tax revenues… Because of the measures that I took in the Budget, inflation is going to be 0.4 percentage points lower next year than they originally forecast because of our cost of living measures to reduce inflation.”
Ms Reeves said she had been very clear in communicating the need for tax increases to the public.
She stated,
“£4bn is clearly not enough fiscal headroom. It would have been the lowest headroom.”
When questioned whether she did not inform the public about the surplus, the chancellor replied,
“I said in that speech that I wanted to reduce the debt and reduce borrowing so I increased that headroom. I’m very happy to be answerable.”
She said,
“I said in that speech that I wanted to increase our resilience by increasing the headroom. I was very clear in that speech.”
Pressed on extra welfare spending, the chancellor said,
“One of the things I did in the Budget was lift 450,000 children out of poverty. That was funded through cracking down on tax avoidance, more measures in the Budget, and introducing a gambling tax. I always said that to reduce child poverty it had to be fully costed and fully funded.”
Ms Reeves defended withholding information on £4.2bn of fiscal headroom, arguing it would not have been “enough.”
She faced questioning after being told she was aware of a £4bn surplus, with the interviewer asking why she had misled the public.
Ms Reeves said,
“First of all that was pre-any measures, as they have been very clear. But if I was on this programme today and I said I’ve got a £4.2bn surplus you would have said, and rightly so, ‘that is not enough Chancellor.’”
When asked why she did not disclose the £4.2bn headroom, Ms Reeves defended her decision, saying
“The way that the OBR forecast works is that they do the forecast before any plans and this was pre-any measures. But the just over £4bn surplus was not enough.”
She added,
“I said in that speech I wanted to achieve three things in that Budget, tackling the cost of living […] I wanted to continue to cut NHS waiting lists, which is why I protected NHS spending, and why I wanted to bring the debt and the borrowing down which is one of the reasons why I increased the headroom. £4bn of headroom would not have been enough and it would not give the Bank of England space to continue to cut interest rates.”
How does Rachel Reeves justify supporting larger families?
Rachel Reeves confirmed she is willing for her taxes to help parents who have more than two children.
She was asked why a working woman with two or fewer children should subsidise those who chose to have more after the two-child benefit was scrapped.
Ms Reeves stated,
“Well first of all it’s men and women who decide to have children … I really would prefer you to talk about families but okay. So what the two-child limit did was push children into poverty. More than 300,000 children were pushed into poverty because of this choice and 450,000 children will be taken out of poverty.”
The chancellor added,
“And I think, and I’m a mum with two children, I am very happy to support children with poorer backgrounds live more fulfilling lives. In fact when I became Chancellor I said that I knew my time as Chancellor would have been a success if there were more children from working-class background living fulfilling lives. And I think it is very difficult to live fulfilling lives when you are stuck in poverty.”
She described the two-child benefit cap as “vicious and cruel,” highlighting its impact on children and discussing local child poverty when asked about those benefiting from its abolition.
Ms Reeves continued,
“All children should live fulfilling lives and it is children in the end who end up in poverty … It is children who pay the price for this vicious and cruel policy and that will end in April next year.”
What did Rachel Reeves say about the OBR chairman and the Budget leak?
Rachel Reeves declined to support the OBR chairman as tensions rose between the Treasury and the fiscal watchdog.
When questioned about her confidence in Richard Hughes, the Chancellor spoke amid controversy after the OBR prematurely released its Budget report, raising questions over potential misleading claims.
She replied,
“Look, there is no one who is a bigger supporter of the Office for Budget Responsibility than me. I reappointed Richard Hughes in the summer and we’ve strengthened the powers of the OBR. We will get the report tomorrow, the report that looks at what happens about that Budget leak. It was clearly serious, it was clearly a serious brief of protocol.”
Pressed again and again on whether Mr Hughes’ job is safe, she responded,
“I’ll see that report tomorrow. But I’ve got a huge amount of respect both for Richard and the Office for Budget Responsibility. But I’ll get that report tomorrow.”
What did Rachel Reeves say about breaking her manifesto tax vow?
When asked whether she had implied before the election that ordinary people’s taxes would not rise, Rachel Reeves said,
“We had a manifesto commitment not to increase the rates of National Insurance, income tax, or VAT. In last year’s Budget and this year’s, I have adhered to that promise.”
She stated,
“But I was clear in that speech that you have referenced [on Nov 4] that I would be asking everyone to make a contribution to protect funding for public services, and that is why I made the decision to freeze the tax threshold for a further three years.”
Pressed on whether she had broken Labour’s manifesto pledge not to raise taxes, the Chancellor replied,
“I’ve asked people to make a contribution. We didn’t break the manifesto, we haven’t broken the manifesto because that explicitly said about the rates. But if you’re asking am I asking working people to pay a bit more, yes. The Conservatives tried to sweep it under the carpet, I don’t want to be that sort of Chancellor. I want to be honest and upfront.”
What did Kemi Badenoch say about Rachel Reeves and welfare spending?
Tory leader Kemi Badenoch accuses Rachel Reeves of misleading the public and boosting welfare to protect her job.
When asked if she was satisfied with Ms Reeves’s claim of not misleading voters, Ms Badenoch responded,
“Absolutely not. The Chancellor called an emergency press conference telling everyone about how terrible the state of the finances were.”
She added,
“And now we have seen that the OBR had told her the complete opposite. She was raising taxes to pay for welfare. The only thing that was unfunded was the welfare payment she had made, and she’s doing it on the backs of a lot of people out there who are working very hard and getting poorer. And because of that, I believe she should resign.”
The Tory leader continued,
“She could have cut spending, there was an alternative to this Budget and I spent a long time in that Budget explaining to Rachel Reeves … She’s not focusing on the fact that she did not need to do this. She already came for the biggest ever tax raid last year after promising she wouldn’t raise taxes on working people. She made another promise at that last Budget not to come back for more, she came back for more and it’s all to pay for welfare to save her job. She should lose her job.”
Ms Badenoch added,
“She could have cut spending, we are spending far too much. The Government is living beyond its means. What it should not be doing is giving more welfare bungs. Now what we saw was about half a million families get an average of £5,000 whereas families that are not on welfare, many of them struggling, losing, I read in The Telegraph today, £18,000. That’s terrible.”
What is the two-child benefit cap, and how does the UK plan to scrap it?
The two-child benefit cap is a UK welfare policy introduced in 2017 that limits the amount of financial support families can receive. This means that low-income families do not receive additional support for a third or subsequent child born after April 6, 2017.
The government will remove the two-child limit in full starting in April 2026. Scrapping the policy is a key measure in the government’s agenda to tackle child poverty. It is projected that this change will lift 450,000 children out of poverty by 2029-30 and increase the income of an estimated 560,000 families by an average of over £5,000 per year.
What key measures were introduced in the UK Budget 2025?
- Income tax and National Insurance thresholds frozen until 2028, with more people in higher bands.
- Property, dividend, and savings tax rates up 2%, mansion tax on homes over £2m.
- Pension contributions above £2,000 taxed, ISA annual limit cut to £12,000 from 2027.
- ECO energy scheme scrapped, households saving £150 on bills next year.
- Two-child benefit cap abolished, helping 450,000 children, costing £3bn by 2029-30.
- Minimum wage rises to £10.85 for 18–20-year-olds, national living wage to £12.71.
- Sugar tax extended to milkshakes, dairy drinks; gambling duties revised.
- £4.9bn savings reinvested into NHS, schools, and apprenticeships.