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Calls for multiple investigations following accusations that the chancellor misled the public
Kate DevlinWhitehall Editor Sunday 30 November 2025 23:01 GMTComments
CloseRachel Reeves denies lying about Budget black hole to justify tax hikes
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Sir Keir Starmer will issue a defiant defence of the Budget after Rachel Reeves was forced to deny having lied about the state of the country’s finances in an effort to justify her £26bn worth of tax hikes.
In what will be seen as an attempt to prop up his embattled chancellor, the prime minister will on Monday argue that Ms Reeves has provided economic stability by raising billions of pounds more in so-called fiscal “headroom” to protect against future market shocks.
He will also defend her decision to spend billions more on benefits, rejecting the notion of trying to look “tough” on welfare for the sake of politics – although he will also pledge to reform the system and get more young people who are currently signed off sick into work.
open image in galleryThe PM will defend the Budget amid the row over the actions of his chancellor (AFP via Getty)But he is expected to face questions over Ms Reeves’s conduct, and crucially, whether she broke any rules, after she was accused of misleading the country and the markets ahead of the Budget by failing to disclose that she had a £4bn surplus rather than a £20bn deficit.
It comes as:
- The Conservatives have called for an investigation by the City watchdog, the Financial Conduct Authority (FCA)
- Nigel Farage’s Reform UK has called for a probe into whether the chancellor broke the ministerial code
- Ms Reeves is expected to face questions in the House of Commons over the row
- The chancellor insists the PM was kept fully informed of pre-Budget developments and knew there was no black hole
Pressed during an appearance on Sky News on Sunday to say whether she had lied to the public by not giving a clear picture of the country’s finances, a defiant Ms Reeves said: “Of course I didn’t.”
But Conservative leader Kemi Badenoch accused her of misleading the public, saying that the chancellor had called “an emergency press conference, telling everyone about how terrible the state of the finances were, and now we have seen that the OBR [Office for Budget Responsibility] told her the complete opposite”.
Ms Reeves “should resign”, she added.
open image in galleryRachel Reeves has been forced to deny lying to the public over the state of the country’s finances to justify £26bn of tax hikes (BBC)The extraordinary row erupted on Friday after the OBR said it had informed the chancellor as early as 17 September that the deficit had improved, and told her in October that it had been eliminated altogether.
Despite this, in a major speech given in Downing Street on 4 November, Ms Reeves said that weaker economic productivity had led to “consequences for the public finances” and suggested that tax rises were still necessary to tackle a £20bn gap.
Reform UK has now written to the prime minister’s ethics adviser, Sir Laurie Magnus, asking him to investigate whether Ms Reeves broke the ministerial code. And the Conservatives have called for Ms Reeves to refer herself, her special advisers, and the PM’s chief of staff Morgan McSweeney, to the FCA for formal investigation.
And members of Sir Keir’s top team reportedly accused him and Ms Reeves of misleading the Cabinet, with The Times quoting an unnamed minister as describing the handling of the Budget as “a disaster from start to finish”.
“At no point were the Cabinet told about the reality of the OBR forecasts,” they told the newspaper.
In his speech on the Budget on Monday, Sir Keir will defend the decision of his chancellor to spend billions more on welfare, including by scrapping the two-child benefit cap, the removal of which is expected to lift 450,000 children out of poverty. Sir Keir will say that the last Tory government left “children too poor to eat and young people too ill to work”.
But he will also argue that Labour must reform the welfare state, though not because the party wants “to look somehow politically ‘tough’”. He will claim that “the Tories played that game and the welfare bill went up by £88bn”.
Instead, Sir Keir will argue that the system needs to change because “we have to confront the reality that our welfare state is trapping people, not just in poverty, but out of work. Young people especially.” He will add that this problem costs the country money, opportunity and potential, and that “any Labour Party worthy of the name cannot ignore that”.
The prime minister will say that the changes announced in the Budget, including cuts to energy bills and freezing rail fares, will help to bring down the cost of living, and that the decision to raise taxes to increase fiscal headroom will ensure economic stability, through lower inflation and a commitment to the chancellor’s self-imposed fiscal rule not to borrow to pay for day-to-day spending.
Sir Keir will say “economic growth is beating the forecasts” but the Government must go “further and faster” to encourage it.
He will also announce that he has asked business secretary Peter Kyle to provide monthly updates on driving investment into growth sectors. And he will talk of “rooting out excessive costs in every corner of the economy” to help lower the cost of living and help businesses.
The prime minister wrote in The Guardian that his economic plans will take years to deliver in full, saying: “By delivering a big, bold long-term plan, not a set of quick fixes, we will renew Britain.”
He added that “we will deliver the change we promised and then be judged on it at the next election”.
On Sunday, Ms Reeves hit back at the Institute for Fiscal Studies after it said on Thursday that the better-than-expected economic forecasts meant she had not been given “much of a fiscal repair job” to do at the Budget.
She told the BBC’s Sunday with Laura Kuenssberg: “If I was on this programme today and I was saying a £4bn surplus is fine, there was no economic repair job to be done, I think you would rightly be saying that’s not good enough. That would have been the lowest surplus that any chancellor ever delivered against their fiscal rules.”
She also said the prime minister had been kept fully informed of pre-Budget developments, saying the pair were a “partnership”.
Ms Reeves said: “... 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.”
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