Nov 30 (Reuters) – British finance minister Rachel Reeves on Sunday denied she mislead the public over official forecasts ahead of this month’s budget, saying she had been honest about the need to build up a bigger fiscal buffer.
In a speech on November 4, Reeves appeared to lay the groundwork to break the Labour Party’s promise to voters before the 2024 election and raise income tax rates, citing a “weaker than previously thought” productivity performance.
In a letter published on Friday, the head of Britain’s budget watchdog said it had previously provided the government with forecasts showing that its productivity downgrade was offset by increases in real wages and inflation – which Reeves did not mention.
The confidential forecasts provided to Reeves by the Office for Budget Responsibility watchdog before her November 4 speech showed she would meet her fiscal rules by a margin of 4.2 billion pounds, not including any budget measures or the reversal of welfare cuts earlier in the year.
On Sunday, Reeves told Sky News that boosting that buffer – which would have been very thin by historical standards – was her main concern, which required her to deliver a tough message to the public.
“The just over 4 billion pounds surplus was not enough,” Reeves said. “The headroom would not have been enough, and it would not give the Bank of England space to continue to cut interest rates.”
When the budget was announced on Wednesday, Reeves had more than doubled her headroom against the fiscal rules to 21.7 billion pounds from 9.9 billion pounds in her previous fiscal plan.
The opposition Conservative Party has said that Reeves should resign for misleading the public about the economic situation ahead of her November 26 budget.
(Reporting by Andy BruceEditing by William Schomberg)
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