Chancellor Rachel Reeves has described recent leaks ahead of the autumn budget as 'unacceptable' and clarified that significant tax decisions were made in close coordination with the Prime Minister. Addressing the Commons Treasury Committee,
Reeves reaffirmed her commitment to robust fiscal management and explained that her government's tax strategy including a change of course on potential income tax increases was formulated after frequent consultation with Prime Minister Keir Starmer.
The Chancellor's comments come at a time of heightened scrutiny over the government's fiscal credibility, particularly in the wake of financial market volatility and leadership changes within the Office for Budget Responsibility (OBR).
Reeves denounces pre-budget leaks
Rachel Reeves has strongly criticised the unauthorised release of information prior to the autumn budget, describing the leaks as damaging and inaccurate. She told MPs, 'Leaks are unacceptable there was too much speculation, and much of the speculation was untrue.'
Reeves highlighted concerns over both the accuracy of the information in circulation and the implications for government IT security. The Chancellor stressed that these leaks were not sanctioned, underscoring the importance of maintaining strict confidentiality around fiscal policy announcements.
Efforts are under way within both the Treasury and the OBR to investigate the sources and impact of these leaks.
Income tax policy developed jointly with Prime Minister
Addressing questions from MPs, Reeves detailed the internal deliberations over raising income tax to address fiscal forecasts. She revealed that the government had explored the option of increasing income tax rates but decided it was unnecessary due to stronger-than-expected revenue from other tax measures.
Reeves emphasised, 'We did look at whether we needed to increase the rates of income tax given our concerns around the forecast ...
In the end that was not necessary.' She added that all major decisions were made in 'close partnership' with Prime Minister Starmer, with both meeting regularly to decide budget priorities as 'a team'.
Market reaction to tax policy shift
The government's decision to reverse course on a widely anticipated income tax rise was reported to have initially unsettled financial markets, leading to a brief sell-off in government bonds.
Investors reacted to ongoing uncertainty surrounding the government's broader fiscal plans after media reports suggested the proposed tax increase had been abandoned.
In response, Chancellor Reeves reiterated that no official briefing on tax changes had taken place prior to the public announcement. She stated her intention to provide stability through clear, considered fiscal management and communication.
OBR chair resigns amid document release error
In the aftermath of the budget, Richard Hughes, chair of the Office for Budget Responsibility, resigned following the inadvertent early release of confidential budget documents.
Hughes accepted responsibility for the procedural error, which occurred shortly before Reeves presented her measures to Parliament.
The Chancellor confirmed that a replacement for the OBR chair is unlikely to be appointed before the upcoming spring statement. Meanwhile, investigations into the unauthorised release are ongoing, with the Treasury and OBR seeking to strengthen internal protocols.
Fiscal headroom and future fiscal policy
Reeves indicated that nearly £22 billion in fiscal headroom was created during the autumn budget, allowing her to meet existing fiscal rules without resorting to immediate additional tax rises or spending reductions.
She explained, 'I reserve the right to take action at any point. But I believe the headroom we have, and the changes we have made, means we won't have to take that action in the spring.'
While she has not ruled out further measures if public finances deteriorate, Reeves downplayed the likelihood of immediate action and affirmed her commitment to transparency and pre-announcement consultation where possible.
Final Summary
Chancellor Rachel Reeves has moved to reinforce government credibility following a period of budgetary speculation, unauthorised leaks, and market uncertainty.
By emphasising Cabinet-level collaboration on tax policy, committing to further legislative safeguards, and underlining the fiscal headroom available, Reeves sought to reassure both Parliament and investors.
Ongoing investigations into recent information breaches and developments at the OBR signal a focus on restoring trust and ensuring the integrity of future fiscal announcements. For up-to-date insights on government tax policy and public finance developments, readers can explore additional resources with the Pie app.
