British Chancellor Rachel Reeves is under mounting pressure after new disclosures suggested she may have left out key information when warning the public about the state of the economy ahead of this month’s budget. Reeves insists she acted transparently and argues that building a much larger fiscal buffer was essential to protect the country from economic volatility.

The dispute originated from a November 4 speech in which Reeves cited a “weaker than previously thought” productivity outlook, language that many observers took as preparation for breaking Labour’s pre-election commitment not to raise income tax rates. However, a letter published by the Office for Budget Responsibility (OBR) on Friday revealed that the watchdog had already given the Treasury confidential forecasts indicating that the productivity downgrade had been offset by rising real wages and higher inflation, leaving Reeves with more fiscal space than she suggested at the time.

Fiscal headroom

According to the OBR, the private projections showed Reeves still had £4.2 billion of headroom under her fiscal rules before any new measures were announced. That surplus, while modest, implied that the government was not facing an immediate risk of breaching its borrowing limits. The opposition Conservatives quickly seized on the revelation, accusing the chancellor of deliberately overstating fiscal pressures to justify tax increases and welfare changes.

Reeves rejected that interpretation in a Sunday interview with Sky News, arguing that the buffer was dangerously small given the economic uncertainty facing the UK. "The just over 4 billion pounds surplus was not enough," she said. "The headroom would not have been enough, and it would not give the Bank of England space to continue to cut interest rates."

Her defense echoes concerns raised by analysts who note that the UK’s fiscal position has grown increasingly sensitive to inflation, gilt market volatility, and slower projected growth. OBR officials have repeatedly warned that even seemingly comfortable margins can disappear quickly if forecasts deteriorate or borrowing costs rise unexpectedly.

Budget uproar

When Reeves delivered the full budget on November 26, she unveiled a drastically expanded fiscal buffer. The headroom against her fiscal rules jumped to £21.7 billion, more than double the £9.9 billion available in her earlier plan, and far above the confidential £4.2 billion baseline. The increase was achieved through a sweeping combination of tax changes, spending decisions, and the reversal of prior welfare cuts.

The government argues that a larger cushion was vital to restore confidence after years of instability under previous administrations. Financial markets appeared to welcome the approach: UK government bond prices rose sharply following the budget, and some economists credited the chancellor with stabilizing the outlook for borrowing costs.

But critics say the episode exposes a deeper transparency problem. Opposition figures have called for inquiries into why Reeves did not mention offsets in the OBR’s private forecasts and whether omitting them misled Parliament, voters, or markets. Some Conservatives have gone further, alleging that the Treasury’s earlier messaging about fiscal deterioration amounted to political manipulation.

There are also questions about the leak of OBR estimates shortly before the budget’s publication, an event the watchdog’s chair described as “mortifying.” The leak has sparked calls for a review of cybersecurity and internal communications procedures at the Treasury.

Reeves, however, maintains she acted responsibly and communicated the situation as she understood it, stressing that her priority was to protect the public finances.

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