SNP Westminster Leader, Stephen Flynn, wants the Financial Conduct Authority (FCA) to investigate allegations that the Chancellor deliberately made misleading statements about the nation’s finances.
On 4 November, ahead of the Budget, Rachel Reeves warned of a £20 billion shortfall in meeting her self-imposed rule of not borrowing for day-to-day spending.
In Wednesday’s Budget she hiked taxes by £26 billion, including an extended freeze on income tax thresholds.
However, the Office for Budget Responsibility (OBR) revealed on Friday it had informed the Chancellor as early as 17 September that the gap was likely to be smaller than initially expected. It had said that higher wages – which she did not mention – would help her meet spending rules.
Conservative leader Kemi Badenoch called for the Chancellor to be sacked, saying she had “lied to the public to justify record tax hikes”.
Mr Flynn has now accused Ms Reveve of using “fake £20 billion blackhole briefings to lay the ground for potential income tax rises” and says the “developing accusations are deeply significant and serious”.
In a letter to Nikhil Rathi, chief executive of the FCA, he said the accusations “involve the allegation that persons within the UK government deliberately authorised and made fraudulent briefings, which misled the public, parliament, the media and the financial markets – all in advance of a UK budget, which was built on a lie, raised taxes by £26 billion and will result in reduced living standards for the public.”
His intervention follows confirmation that the FCA will use its powers to investigate any “potential market manipulation in the Office for Budget Responsibility’s early release of its budget forecasts”.
The SNP is now calling for this investigation to be immediately extended to include “the accuracy and intent of false budget briefings” from the Treasury and Chancellor.
The Financial Conduct Authority (FCA) controls strict regulation around the use of the media for the communication of market sensitive information and has the power to investigate potential instances of market manipulation and maleficence.
Downing Street has denied the claims.
“I don’t accept that,” the Prime Minister’s official spokesman said.
He added: “As she [the Chancellor] set out in the speech that she gave here [Downing Street], she talked about the challenges the country was facing and she set out her decisions incredibly clearly at the Budget.”
A spokesperson for the Treasury 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.”
In an interview with The Guardian Ms Reeves said she had made “fair and necessary” choices, adding: “I wasn’t willing to cut public services, because people voted for change at the election.”
It has also emerged that thousands of pubs, hotels, shops and restaurants face crippling tax rises next year.
Despite promising “permanently lower tax rates for over 750,000 retail, hospitality and leisure properties” in England, a separate government agency slipped out a new and higher assessment of the value of the buildings used to calculate business rates.
The full text of Stephen Flynn’s letter to the chief executive of the Financial Conduct Authority:
“Dear Nikhil,
“In the last number of weeks, the public has been subjected to one of the most chaotic UK budget processes in recent history. Now, credible and widespread reports are emerging that suggest that not only were those UK government briefings chaotic, they were also deliberately false and misleading.
“Given that these briefings emanated from the UK government and the UK Treasury led by Chancellor Rachel Reeves – with all the economic status and authority that affords – these are deeply serious accusations. They are, in essence, an accusation that – for weeks – the public, parliament, the media and the financial markets were all deliberately misled by the Labour government.
“The core of these allegations centre on prominent briefings from the UK government over the course of several months. Those briefings were adamant that the forthcoming UK budget would be required to fill a £20 billion black hole in the Treasury’s finances as a result of the downgrading of the UK’s productivity by the Office for Budget Responsibility (OBR).
“However, the Office for Budget Responsibility has now confirmed that it informed the Chancellor on September 17th – over 2 months before the UK budget – that the downgrade in productivity forecasts was offset by ‘increases in real wages and inflation’.
The deficit was in fact just £2.5 billion. By October 31st, the OBR confirmed to the Treasury that the deficit had by then become a net positive of £4.2 billion. Therefore, the £20 billion black hole that was deliberately briefed, did not exist and the Chancellor was fully aware that she was sitting on a surplus.
“Despite this, and despite the fact that there remained no correction or clarification of the false and deeply misleading briefings regarding the existence of a £20 billion black hole, Chancellor Rachel Reeves took the almost unprecedented step on the 4th November – through a keynote morning speech – to use the backdrop of the fake £20 billion blackhole briefings to lay the ground for potential income tax rises.
“That intervention, framed in the context of those false and misleading briefings, was self-evidently a significant market intervention but the question now arises whether it was also a market manipulation.
“That intervention from the Chancellor, alongside the briefings on the need to fill the non-existent £20 billion Treasury black hole, had a significant impact on the financial markets, on business investment decisions, on foreign exchange rates and will likely have fed into the Bank of England decision making around interest rates which took place two days after her speech.
“The Financial Conduct Authority (FCA) rightly controls strict regulation around the use of the media for the communication of market sensitive information and the powers of your office enable you to investigate potential instances of market manipulation and maleficence. I am, therefore, urging you to initiate an immediate investigation into the UK government briefings conducted ahead of this chaotic UK budget, including those made by Chancellor Rachel Reeves.
“I am aware that the FCA has already decided to conduct an investigation into any potential ‘market manipulation’ relating to the early release of the OBR’s budget forecast – the public will now rightly expect that this is now extended to include an immediate investigation into the accusations of false and deeply misleading budget briefings emanating from a UK Treasury led by the Chancellor Rachel Reeves.
It is clearly in the public interest to investigate:
- Whether fraudulent briefings were deliberately provided to the media and public?
- If so, what was the purpose and intent of these briefings, given Chancellor Rachel Reeves and her UK government colleagues knew them to be false and misleading at the time they were made?
- If such briefings were deliberately given, who in power authorised them?
“These developing accusations are deeply significant and serious – they involve the allegation that persons within the UK government deliberately authorised and made fraudulent briefings, which misled the public, parliament, the media and the financial markets – all in advance of a UK budget, which was built on a lie, raised taxes by £26 billion and will result in reduced living standards for the public.
“It is, therefore, appropriate and necessary that these new allegations are immediately investigated.
“Yours sincerely,
Stephen Flynn MP”
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