Starmer rejects claims government misled public as tensions with OBR escalate

"Prime Minister Keir Starmer has denied accusations that Chancellor Rachel Reeves misled the cabinet or the public over the state of the public finances ahead of last week's Budget, after a fresh row erupted between the Treasury and the Office for Budget Responsibility (OBR). Speaking at a nursery in London, Starmer defended Reeves' tax rises and her decision to scrap the two-child benefit cap, despite weeks of speculation over possible income tax hikes. He insisted that revenue-raising measures were unavoidable and dismissed allegations that the government exaggerated the scale of its fiscal challenges. "There was no misleading," he said. "It was inevitable we would always have to raise revenue. I was clear we needed more headroom.""

"His comments follow criticism of the Treasury's pre-Budget handling after Reeves repeatedly signalled that income tax rates might be raised - a position later abandoned. Reports suggested the Treasury believed there was a £30bn shortfall in fiscal headroom, a figure now disputed by the OBR. In a letter to the Treasury Select Committee, OBR chair Richard Hughes confirmed that there was no significant deterioration in the public finances after 20 October, aside from the government's decision to ditch planned welfare cuts. That assessment contradicts claims circulating in early November that the UK faced a much deeper fiscal hole."

"Further questions have arisen about the timing of Reeves' statements. On 5 November, she implied Labour was prepared to break its manifesto pledge on income tax. By 13 November, media briefings claimed tax rises had been shelved due to improved forecasts. The OBR has since confirmed no such improvement occurred in that period. The BBC's political editor, Chris Mason, said on Monday that the Treasury had "misled the public" by allowing speculation to build on inaccurate or incomplete information."

Keir Starmer denied accusations that Rachel Reeves misled the cabinet or the public about the state of the public finances ahead of last week's Budget. Starmer defended Reeves' tax rises and the decision to scrap the two-child benefit cap, saying revenue-raising measures were unavoidable and more headroom was needed. The Treasury faced criticism after Reeves signalled possible income tax rises then abandoned that position amid reports of a £30bn fiscal headroom shortfall now disputed by the OBR. OBR chair Richard Hughes said there was no significant deterioration after 20 October aside from ditching planned welfare cuts, and questions remain over the timing of statements and media briefings about forecast improvements.

Read at Business Matters