Rachel Reeves has admitted that the briefings and leaks in the run-up to her tax-raising Budget were “extremely damaging” – but has insisted she did not authorise them.
The chancellor faced a grilling from MPs about her Budget, with the fallout from the chaos that preceded the fiscal event last month still casting a shadow over her future.
She confirmed that a leak inquiry is underway, with officials noting that in the past, people have been sacked over unauthorised briefings.
It came as Ms Reeves confirmed that she and Sir Keir Starmer had decided “as a team” not to raise income tax, as she said there had been “too many leaks” in the weeks before the Budget.
The admission follows a bizarre series of events that took place in November. First, the chancellor gave an emergency press conference, suggesting that she intended to breach a key manifesto promise not to raise income tax. But a few days later, a leak revealed that the party had decided to U-turn on the issue.
Appearing before parliament’s Treasury select committee on Wednesday, the chancellor told MPs that the “very close partnership” between her and the prime minister meant that the decision to instead extend a freeze on tax thresholds – dragging millions more into paying higher taxes – had been made jointly.
Ms Reeves also said that a Financial Times story, which revealed that she had dropped the plan to raise income tax, had been “incredibly damaging”.
She said: “It was not an off-the-record briefing; it was a leak. I’m absolutely categorical that that was not an authorised briefing.”
She said the report was “frustrating” because it gave the impression that she might have abandoned her commitment to rebuild the “headroom” required to enable the economy to withstand financial shocks.
Ms Reeves told the committee: “The Budget had too much speculation. There were too many leaks, and much of that, those leaks and speculation, were inaccurate, very damaging, as well as the IT security issues ... The OBR’s [Office for Budget Responsibility] report also noted that the spring statement had been accessed early as well.
“I want to say on the record how frustrated I am and have been by these incidents and the volume of speculation and leaks, and that is why I am doing something about it, because we cannot allow this to happen again.
“A leak inquiry is underway with my full support, being led by the permanent secretary at the Treasury, and we are also conducting a review of the Treasury security processes to inform future fiscal events.”
Appearing alongside Ms Reeves, Treasury permanent secretary James Bowler confirmed that the leak inquiry would cover ministers as well as officials and advisers.
Asked whether the prime minister had made the decision not to raise income tax, Ms Reeves said she had met with Sir Keir “two, three times a week during the Budget process”.
She said: “That is not always the case between chancellors and prime ministers. I recognise that. But there is a very close partnership between me and the prime minister.
“And so we took him through all of the numbers and all of the options, and we decided it together as a team, because that is what the prime minister and I are.”
The chair of the OBR, Richard Hughes, resigned after the watchdog’s assessment of the chancellor’s plans was inadvertently made available online before she delivered her speech last month.
His departure came days after Ms Reeves faced accusations that she had misled the public about the state of the public finances, following the publication of a letter from the OBR that contested her claim that she needed to raise taxes to fill a so-called “black hole”.
The letter instead revealed that the OBR’s pre-Budget forecasting had suggested that Ms Reeves’s spending plans would run a surplus because of changing economic headwinds.
Meanwhile, a Tory-led debate in the Commons on Wednesday afternoon will see the party use a parliamentary process known as a censure motion to call on Ms Reeves to apologise for how the Budget unfolded.
Addressing the Treasury committee, Ms Reeves said there had been a lot of information shared between the OBR and the Treasury in the weeks leading up to the Budget.
“Pre-measures are not the final word from the Office for Budget Responsibility, because then you have post-measures forecasts,” she told MPs. “They take into account the policy decisions that we take as a government on tax and spend ... so there was plenty of additional information being shared between the OBR and the Treasury between 30 October and major measures one, and indeed major measures two.”
Ahead of the Conservative-led debate later, shadow chancellor Sir Mel Stride accused Ms Reeves of putting “party before country”.
He said: “Rachel Reeves has repeatedly misled the British public. She promised she wouldn’t raise taxes on working people – and then she did. She insisted there was a black hole in the public finances – and there wasn’t.”
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