UK (Parliament Politics Magazine) – Chancellor Rachel Reeves under pressure as OBR confirms her £30bn ‘black hole’ warning was overstated, sparking calls for her resignation.
As reported by The Standard, Chancellor Rachel Reeves faces calls to quit after figures suggest she may have overstated the UK’s fiscal ‘black hole’ before November’s Budget.
The Chancellor warned of “tough decisions” ahead, citing a £30bn fiscal gap to support tax rises and suggesting the Office for Budget Responsibility might lower the UK’s productivity outlook.
What did the OBR say about the UK’s £30bn ‘black hole’?
According to the OBR, the true fiscal shortfall on September 17 was only £2.5bn, far less than the £30bn claimed by the Chancellor.
OBR chairman Richard Hughes told the Treasury Committee that the Chancellor never faced a black hole exceeding £2.5bn.
Next week, Mr Hughes will appear before the Treasury Select Committee, and Ms Reeves will face questions on Sunday political shows.
According to him, the OBR upgraded its forecasts on October 31, informing Ms Reeves that the UK actually had a £4.2bn surplus despite lower productivity.
Mr Hughes confirmed he briefed the Chancellor on the productivity downgrade on August 7, well before any income tax speculation, and the figures were not later revised.
He wrote in the letter,
“We did not revisit that 0.3 percentage point reduction at any subsequent point in the forecast process. At no point in our pre-measures forecast process were either of the Government’s fiscal targets missed by more than £2.5bn.”
How are politicians reacting to Rachel Reeves’ disputed fiscal warnings?
Reform UK deputy leader Richard Tice said the Chancellor “deliberately alarmed businesses, consumers, and markets” ahead of the Budget.
He added,
“She has deliberately crashed the economy and must now consider her position.”
Tory leader Kemi Badenoch described Rachel Reeves as “shameful” and accused her of misleading the public.
She added,
“Yet more evidence, as if we needed it, that the Chancellor must be sacked. For months, Ms Reeves has lied to the public to justify record tax hikes to pay for more welfare.”
Sir Mel Stride, the shadow chancellor, added,
“We now know the truth. Rachel Reeves spent the months leading up to the Budget claiming she would need to make difficult choices because of a downgrade in the economic forecasts that was not of her making. She even let it be known she was considering raising income tax rates.”
What did Paul Johnson say about the Chancellor’s fiscal claims?
Paul Johnson, ex-chair of the Institute for Fiscal Studies (IFS), said,
“I think it [her November 4 press conference] probably was misleading.”
He claimed her statements were “clearly intended” to align with forecasts from independent bodies like NIESR, which predicted Ms Reeves would face a multi-billion-pound fiscal gap.
Mr Johnson added that the speech was
“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.”
What did NIESR say about Reeves’ November Budget speech?
NIESR deputy director Stephen Millard said Rachel Reeves’ actions can be interpreted in more than one way.
He stated,
“It could be argued that the chancellor misled the public, and importantly the financial markets, in the run-up to the budget – and particularly in her speech on 4 November – when she presented the fiscal position as being bleak and stressed the need for significant tax rises.”
Mr Millard added, “However, it is equally possible that she simply wanted to prepare the public for the large tax increases in the Budget that were necessary for her to build a bigger ‘buffer’ against her fiscal rules, something that NIESR argued for in our Autumn Economic Outlook.”
He continued,
“If this were the case, then actually it would be important to let the markets know that she was serious about raising taxes, which the 4 November speech did. Although we feel that the £22bn buffer is not enough – we advocated £30bn – increasing the size of the buffer does make it less likely that the OBR’s March forecast will require a further response from her (like it did back in March of this year), allowing her to stick to her pledge of only one fiscal event next year.”
How did Rachel Reeves respond to criticism over her Budget choices?
Rachel Reeves defended her Budget decisions, saying they were “fair and necessary” and ruled out making cuts.
She argued that the wealthy should fund the rebuilding of Britain’s “creaky” public services and dismissed suggestions that working-age taxpayers were paying more than pensioners.
The chancellor added,
“I wasn’t willing to cut public services, because people voted for change at the election. We’ll never get out of this problem of weak growth unless we’ve got investment in the economy, and we’re investing in things to boost our productivity.”
Ms Reeves spoke on recent leadership speculation, insisting that the party continues to support Sir Keir Starmer as Prime Minister.
She continued,
“We all know what happened in the last government, when they went through leaders and chancellors. It was bad for the country.”
Commenting on claims that the Chancellor misled the public about the fiscal gap, the Treasury defended Ms Reeves, saying:
“We’re not going to get into the OBR’s processes or speculate on how that relates to internal decision-making. 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. It’s important to preserve a private space for Treasury-OBR policy and forecast discussions.”
What are the key points of Rachel Reeves’s 2025 Budget?
- Tax thresholds will be frozen for three more years from 2028.
- Gambling taxes will increase, raising over £1bn.
- A new per-mile tax will apply to electric and plug-in hybrid cars from 2028.
- The two-child benefit cap will end from April 2026.
- Salary-sacrifice pension contributions above £2,000 will face National Insurance from 2029.
- The mansion tax will be introduced on properties worth over £2 million.
- The national living wage and minimum wages for younger workers will increase next April.
