Rachel Reeves has denied lying to the public in the build-up to last week’s budget, insisting she needs to raise taxes to record levels to ensure economic stability.
The Chancellor said on Sunday that he had announced £26 billion worth of tax rises on Wednesday to build a buffer against his fiscal regime and reduce the risk of further tax rises in the future and to protect public spending.
However, his message differed from what he said before the budget, when he said a tax increase would be necessary due to the expected decision by economic forecasters to lower their growth expectations.
Finally, the Office for Budget Responsibility (OBR) lowered its expectations for economic productivity, but said unexpectedly strong wage growth and tax receipts would offset this.
The OBR’s comments have triggered a political storm, leading to opposition politicians calling for Reeves to resign. Keir Starmer is expected to defend the chancellor in a speech on Monday, during which he will also announce new measures to boost economic growth.
On Sunday, Reeves told the BBC’s Laura Kuenssberg: “I wanted to create fiscal, economic flexibility. The headroom I had in the spring statement of £9.9 billion, I’ve taken it up to £21.7 billion.”
She added: “I know some people are suggesting that the OBR published on Friday was a small surplus. But if I was on the program today and I was saying a £4 billion surplus was fine, there was no economic repair work to be done, I think you’d be right that that’s not good enough.
“It would have been the lowest surplus ever delivered against fiscal rules by any chancellor. I was clear that I wanted to build in that flexibility, and that’s why I took these decisions.”
She said she was confident of her position as Chancellor, despite calls from the Conservatives and Reform UK for her to resign.
“I was an MP in the opposition for 14 and a half years. I have been underestimated all my life. As a young girl from an ordinary background, people make assumptions about me. I have challenged them before, and I will challenge my critics again,
Starmer and Reeves have spent the past few days defending decisions they made in the budget, including freezing the income tax threshold to help pay for more headroom and nearly £8 billion more in welfare spending than previously planned.
Much of the criticism of Reeves has focused on comments he and his allies made in the build-up to the budget as he considered breaking manifesto commitments and raising income tax rates.
In a speech earlier this month, he said: “It is already clear that the productivity performance we inherited from the previous government is weaker than before.
“A less productive economy is one that produces less per hour worked. This has consequences for working people – for their jobs and for their wages, and it also has an impact on public finances in the form of lower tax receipts.”
Conservative leader Kemi Badenoch said on Sunday she thinks the chancellor should resign.
“The Chancellor called an emergency press conference and told everyone how bad the financial situation was, and now we’ve seen the OBR tell him exactly the opposite,” Badenoch told the BBC.
“Because of this, I believe he should resign.,
Badenoch defended the tone of some of his criticisms, including personal ridicule of the Chancellor in the House of Commons.
She accused Reeves of ” wallowing in self-pity and whining about misogyny and misogynistic behavior” in his official budget response – comments Reeves made on Sunday made her “uncomfortable” because of their personal nature.
However, Badenoch insisted that his tone in criticizing the Chancellor was correct, saying: “My job is to hold the government to account, not to provide emotional support to the Chancellor.”
Downing Street defended Reeves over the weekend. A Number 10 source told reporters: “The idea that there was any misguided talk about the need to raise significant revenues as a result of the OBR figures, including the fall in productivity, is clearly untrue.”
Starmer will repeat those sentiments in a Downing Street speech on Monday morning in which he is expected to praise the budget for reducing the cost of living and inflation.
He will also announce cuts to business regulation in a renewed effort to boost economic growth, including reforming rules on building nuclear power plants.
The Prime Minister is also expected to announce that the Business Secretary, Peter Kyle, has been asked to look at the processes normally associated with large infrastructure projects.
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