Starmer denies misleading public as fresh row with OBR erupts
Prime Minister Keir Starmer has denied accusations that Chancellor Rachel Reeves misled cabinet colleagues – and the country – over the state of public finances in the lead-up to the Budget as tax rumours hinged on the belief that there was a £30bn shortfall in the fiscal headroom.
In a press conference at a nursery in London, Starmer defended Reeves’ tax measures and extra spending commitments to lift the two-child benefit cap at the Budget despite questions over months of kite-flying and pitch-rolling in the lead-up to the Budget.
Starmer held firm on the claim that a productivity downgrade by the Office for Budget Responsibility (OBR) had forced the government to raise revenue as he added that he was “bemused” by the timing of the fiscal watchdog’s review of growth.
“It was inevitable we would always have to raise revenue,” Starmer said. “There was no misleading.”
“I was clear we needed more headroom.”
PM did consider breaking manifesto
The Prime Minister also confirmed reports that the government was considering a breach of Labour’s manifesto commitments to not raise rates of income taxes but he was not pressed on why that decision was abandoned.
The questions surrounding pre-Budget briefings in an early ‘scene setter’ press conference and anonymous quotations in news outlets put Reeves and Starmer in an awkward position, with opposition parties including the Conservatives and Reform UK calling for the Chancellor to resign.
In a letter to the Treasury Select Committee last week, OBR chair Richard Hughes confirmed that there was no shortfall in the public finances after 20 October not including ditched welfare cuts, suggesting the government’s shortfall was considerably smaller than widely thought.
The first accusation against the government involves a question over whether there was a £30bn fiscal hole in the public finances, with Reeves letting speculation run wild by strongly suggesting that income tax rates would be increased at a press conference in early November.
The other question hangs over the timing of Reeves’ press conference on 5 November when she strongly suggested that the Labour manifesto would be breached and media reports on 13 November suggesting a plan to hike income taxes had been abandoned due to improved forecasts.
The OBR has since confirmed there was no such improvement in forecasts in this time period.
The BBC’s political editor, Chris Mason, said this morning that the Treasury has misled the public based on the information provided – and the information withheld.
Starmer pointed the finger at the timing of the OBR’s productivity review for forcing the government to raise revenue, claiming he was “bemused” that the fiscal watchdog had not revised its trend forecasts before the last General Election.
He added: “I’m not angry at the productivity review. It’s a good thing to do them from time to time.”
He also said the OBR was “vital and integral” to the government’s efforts to maintain financial stability.
Hughes is set to be questioned by MPs on Tuesday in a showdown hearing that could unmask the tensions between the Treasury and the OBR.
Starmer ‘accepts’ nuclear power planning reforms
The speech in Central London was aimed at rolling out the government’s next steps as it pushes ahead with its central mission to grow the UK economy.
It said that three areas – deregulation, welfare reform and boosting trade ties – would be key to improving people’s living standards.
During his speech, the Prime Minister appeared to confirm that all recommendations in a landmark review of nuclear power would be accepted.
There had been concerns that the government would water down some aspects of proposals set forward by the economist John Fingleton, who said that excessive focus on “process” over “outcome” in planning had made the UK the costliest place to build nuclear power plants.
Starmer said he was “accepting the Fingleton recommendations”, with business secretary Peter Kyle to be charged with implementing reforms to other sectors.
The announcement has received some praise from think tank gurus and pressure groups in favour of growth.
“Whilst there is more to do, today represents the biggest, most radical change to nuclear regulation in our country’s history,” said Lawrence Newport of Looking for Growth.
“These reforms will transform our energy sector, allowing us to make more energy here and reduce bills for businesses and households across the country.”