Chancellor Rachel Reeves has denied misleading the public over UK finances before the Budget, stating she “was very upfront” about the need to find more money.
The Chancellor has found herself in the firing line since Wednesday’s crunch Budget, as she faces increasing questions on tax rises and freezing the income tax threshold.
However, Reeves has insisted that she did not mislead or lie the public, claiming she was “very clear” about the need to put up taxes, despite not informing people of the £4.2bn fiscal headroom available.
In an interview with Sky News Trevor Phillips, she said: “I spoke about the Office of Budget Responsibility’s review of productivity in the economy, and that there was likely to be a substantial downgrade.”
“That downgrade came, and it took £16 billion off of tax receipts, and as a result, we did have to make decisions at the Budget to increase taxes.”
She added that she explained that everyone in the UK would be asked “to make a contribution” in the Budget to protect funding for public services.
Freezing thresholds
However, Reeves noted that the tax rises in the Budget did not break Labour’s manifesto commitments, acknowledging that she”stuck” to her promise to not raise income tax, national insurance or VAT.
In an interview with the BBC’s Laura Kuenssberg, she said: “We didn’t break the manifesto.
“We haven’t broken the manifesto because that explicitly said about the rates.
“But…am I asking working people to pay a bit more? Yes, I am asking working people to pay a bit more.”
But, economists and political opponents have hailed the move to extend the income tax threshold to 2031 as a manifesto break.
The £8.3bn “stealth tax” will drag 920,000 more Brits into paying 40 per cent tax on their income.
Meanwhile, 780,000 more people will be paying into public coffers as the basic rate and if families with small children see their income creep over £100,000 the loss of 30 hours of free childcare adds an additional blow.
Abolishing child benefit cap
Reeves also defended her decision to abolish the two child benefit cap as of April 2026, a rule that restricts both universal credit and tax credits to a maximum of two children per household.
Reeves denied that she bowed to pressure from Labour backbenchers to abolish the cap, stating the government was “choosing children”.
She said: “This lifts more than half a million children out of poverty.
“The people I was thinking about were kids who I know in my constituency go to school hungry and go to bed in cold and damp homes, and from April next year those parents will have a bit more support to help their kids.”
However, Conservative leader Kemi Badenoch said the decision to abolish the cap was “immoral” and instead placed more debt onto the next generation.
She said in an interview with Trevor Phillips: “It is immoral to saddle the next generation and children who are not yet born with debt so that people alive today can be a little bit more comfortable.”
“We would put that cap back.
“Somebody has to draw the line somewhere…only the Conservatives are saying this is getting out of hand.”