Sir Keir Starmer has denied he and the chancellor misled the public and the cabinet over the state of the UK’s public finances ahead of the budget.
The prime minister told Sky News’ political editor Beth Rigby “there was no misleading”, following claims he and Rachel Reeves deliberately said public finances were in a dire state, when they were not.
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He said a productivity review by the Office for Budget Responsibility (OBR), which provides fiscal forecasts to the government, meant there would be £16bn less available so the government had to take that into account.
“To suggest that a government that is saying that’s not a good starting point is misleading is wrong, in my view,” Sir Keir said.
Cabinet ministers have said they felt misled by the chancellor and prime minister, who warned public finances were in a worse state than they thought, so they would have to raise taxes, including income tax, which they had promised not to in the manifesto.
At last Wednesday’s budget, Ms Reeves unveiled a record-breaking £26bn in tax rises.
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The OBR published the forecasts it provided to the chancellor in the two months before the budget, which showed there was a £4.2bn headroom on 31 October – ahead of that warning about possible income tax rises on 4 November.
Sir Keir added: “There was a point at which we did think we would have to breach the manifesto in order to achieve what we wanted to achieve.
“Late on, it became possible to do it without the manifesto breach. And that’s why we came to the decisions that we did.”
Sir Keir said a productivity review had not taken place in 15 years and questioned why it was not done at the end of the last government, as he blamed the Conservatives for the OBR downgrading medium-term productivity growth by 0.3 percentage points to 1% at the end of the five-year forecast.
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The prime minister added: “I wanted to more than double the headroom, and to bear down on the cost of living, because I know that for families and communities across the country, that is the single most important issue, I wanted to achieve all those things.
“Starting that exercise with £16 billion less than we might otherwise have had. Of course, there are other figures in this, but there’s no pretending that that’s a good starting point for a government.”
On Sunday, when asked by Sky’s Trevor Phillips if she lied, Ms Reeves said: “Of course I didn’t.”
She also said the OBR’s downgrade of productivity meant the forecast for tax receipts was £16bn lower than expected, so she needed to increase taxes to create fiscal headroom.
