LONDON — Downing Street has denied accusations that Chancellor Rachel Reeves misled the public about the state of the UK’s public finances ahead of this week’s Budget, following criticism from senior Conservative figures who claim she painted an unnecessarily bleak economic picture to justify tax increases.

In the weeks leading up to Wednesday’s Budget, Reeves repeatedly warned that a downgrade in the UK’s productivity outlook would make it harder to meet her fiscal rules.

However, a letter sent to MPs on Friday by Richard Hughes, chairman of the Office for Budget Responsibility (OBR), revealed that the watchdog had also forecast higher wages—an element Reeves did not publicly highlight—which would help improve the Treasury’s position.

The Conservatives seized on the disclosure, accusing Reeves of presenting an overly pessimistic outlook as a “smokescreen” for raising taxes. Tory leader Kemi Badenoch went further, alleging the chancellor had “lied to the public” and should be dismissed.

In his letter to the Commons Treasury Committee, Hughes confirmed that the OBR told the chancellor on 17 September that the public finances were healthier than previously assumed.

He also said that on 31 October, the OBR informed the Treasury that the government was still on track to meet its rule of not borrowing for day-to-day spending, albeit with a reduced margin.

Despite this, Reeves used a pre-Budget speech on 4 November to warn that weaker productivity would lower future tax receipts.

She continued to reference the productivity downgrade in subsequent interviews, fuelling expectations of significant tax rises.

The OBR has now clarified that while productivity was downgraded, the impact would be significantly “offset” by stronger wage growth, providing the chancellor with enough fiscal headroom to meet her rules.

A Treasury spokesperson declined to comment on internal Budget preparations but said Reeves had made decisions to “cut the cost of living, cut hospital waiting lists and double headroom to cut the cost of our debt.”

Although Reeves ultimately avoided raising income tax rates, the Budget introduced £26 billion in tax measures, including extending the freeze on income tax thresholds for an additional three years—pushing more taxpayers into higher bands.

In an interview with The Guardian, Reeves said it was “responsible” to examine income tax and National Insurance options before the OBR finalised its forecasts, adding she would not make cuts to public services.

Conservative shadow chancellor Sir Mel Stride accused Reeves of failing to disclose the positive impact of wage increases on the fiscal outlook. “It was all a smokescreen,” he said. “Labour knew all along they did not need to raise taxes.”

Asked whether Reeves misled voters or markets, the prime minister’s spokesperson rejected the allegation.

“As she set out in her Downing Street speech, she talked about the challenges the country was facing and set out her decisions clearly,” he said, adding that the Budget improved the Treasury’s headroom and delivered “certainty and stability for business.” — BBC