Chancellor Rachel Reeves is being accused of misleading the public over the state of the country’s public finances.
Ahead of the Budget, Ms Reeves warned of a £20 billion shortfall in meeting her self-imposed rule of not borrowing for day-to-day spending.
On 4 November, Ms Reeves set the scene for the Budget with an unprecedented Downing Street speech in which she suggested tax rises were needed to secure the UK’s economic future amid weak productivity.
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 for the Chancellor to be sacked, saying she had “lied to the public to justify record tax hikes”.
Downing Street has denied the claims.
“I don’t accept that,” the Prime Minister’s official spokesman said.
He added: “As she 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 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 Chancellor also failed to mention to MPs that the 40% discount on business rates in England, which many shops, pubs, restaurants have been benefiting from since the pandemic, ends in April.
Together, these two changes more than wipe out any benefit from the reforms Reeves announced in the budget.
UK Hospitality, a trade group that represents the industry, said the average pub’s business rates would increase by 15% next year, adding £1,400 to the typical tax bill. By the following year, the bill would be £4,500 higher and by 2028 they would pay an extra £7,000, an increase of more than 65 per cent on today’s level.
The Treasury defended the changes. A spokesman said: “We’re protecting pubs, restaurants and cafés with the budget’s £4.3 billion support package — capping bill rises so a typical independent pub will pay around £4,800 less next year than they otherwise would have.
“This comes on top of cutting licensing costs to help more venues offer pavement drinks and al fresco dining, maintaining our cut to alcohol duty on draught pints and capping corporation tax.”
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