'Of course I didn't lie': Rachel Reeves denies misleading public over £20bn Budget black hole

The Chancellor faced fresh scrutiny today over what she told the public and markets about the state of the economy.

It comes amid a growing row over pre-Budget speculation that she faced as much as a £20 billion gap in meeting her fiscal rules, partly as a result of a downgrade in productivity forecasts.

Those rumours were fuelled by Ms Reeves when she used a speech on November 4 to suggest tax rises were needed because poor productivity growth would have "consequences for the public finances".

Read more: What's in the Budget? Key points at a glance

But the Office for Budget Responsibility (OBR) on Friday said it had informed the Chancellor as early as September 17 that an improved tax take from growing wages and inflation meant the shortfall was likely smaller than initially expected, and told her in October it had been eliminated altogether.

Speaking on Sunday, Ms Reeves declared: “Of course I didn’t lie.”

The Chancellor also dragged Sir Keir Starmer into the ongoing row, confirming he was briefed every step of the way ahead of the Budget.

Speaking to Sunday with Lewis Goddall on LBC, the Chief Secretary to the Treasury, James Murray, defended the Chancellor, rejecting claims she lied to the public.

He said: "What she actually said in that speech in early November is that we have this productivity review going on by the OBR, that we want to cut the cost of living, cut NHS waiting lists, cut government borrowing, and that we also need to take those decisions to make sure we have extra headroom.

"That was what the Chancellor said in the speech in early November, and that's what we did in the budget."

Downing Street has rallied around Ms Reeves in recent days, with a source saying: "No 10 was aware of the content of her November 4 speech, which we believe entirely accurately outlined the need to raise revenues.

"The idea that there was any misleading going on about the need to raise significant revenue as a result of the OBR figures, including the productivity downgrade they contained, is categorically untrue."

The source also said No 10 was aware of the OBR figures "which showed the need for significant revenue-raising to meet our commitments and to achieve the desired headroom.

"Those figures reflected the OBR's productivity downgrade. The right choices were then made to stabilise public finances through greater headroom, reduce energy bills and tackle child poverty."

They said the OBR forecast had not accounted for increases in spending resulting from the scrapping of the two-child benefit cap and U-turns on winter fuel payments and welfare cuts.

In an attempt to move the agenda on, Sir Keir will use a speech on Monday to support the decisions taken by Ms Reeves in the Budget and set out his long-term growth plans.

He will praise the Budget for bearing down on the cost of living, ensuring economic stability through greater headroom, lower inflation and a commitment to fiscal rules, and protecting investment and public services.

Sir Keir will say "economic growth is beating the forecasts", but that the Government must go "further and faster" to encourage it.

He will confirm reforms to the building of nuclear power plants, after the Government's nuclear regulatory taskforce found that "pointless gold-plating, unnecessary red-tape and well-intentioned, but fundamentally misguided environmental regulation had made Britain the most expensive place to build nuclear power".

"We urgently need to correct this," the Labour leader will say.

Business Secretary Peter Kyle will be tasked with applying the same deregulatory approach to major infrastructure schemes and to accelerate the implementation of Labour's industrial strategy.

Ms Reeves will face a grilling on her pre-Budget statements on the Sunday morning news shows.

She is also expected to tout the Government's record £7.3 billion investment in local roads maintenance, helping councils fix potholes.

'Misleading'

Tory shadow chancellor Sir Mel Stride has reportedly written to the FCA urging it to look into "possible market abuse" arising from "misleading" comments and "the repeated disclosure of market-sensitive details of Budget decisions and the official forecasts".

The leader of the Scottish National Party in Westminster, Stephen Flynn, also called on the City watchdog to launch an "immediate investigation into the accusations of false and deeply misleading Budget briefings", questioning whether Ms Reeves's November 4 speech amounted to "market manipulation".

A Treasury spokesperson said: "We are not going to get into the OBR's processes or speculate on how that relates to the internal decision-making in the build-up to a Budget, but the Chancellor made her choices to cut the cost of living, cut hospital waiting lists and double headroom to cut the cost of our debt."