Chancellor Rachel Reeves' Pre-Budget Conference Sets Ground for Difficult Measures Amid Productivity Revisions
On 4 November, Chancellor Rachel Reeves held an extraordinary, voluntary pre-Budget news conference to outline the framework for a challenging upcoming Budget. In her breakfast speech, she laid out anticipated measures including expected tax rises and steps to address the cost of living, while emphasizing the need for fiscal discipline and maintaining headroom in the financial spreadsheets against her fiscal rules and commitment to long-term investment spending.
The Office for Budget Responsibility (OBR) was expected to revise down productivity growth figures, a key factor influencing the Budget's fiscal calculations and the trade-offs required. It has been argued that Reeves was aware at the time that tax receipts were significantly stronger than expected, which offset the weaker productivity outlook; however, this information was not disclosed during the briefing.
About 10 days later, the Treasury revealed the tax receipts data following a Financial Times report that income tax rates would remain unchanged in the Budget, which led to market scrutiny about the accuracy of the fiscal math. Subsequent Treasury briefings suggested that highlighting strong tax receipts was intended to reassure markets by demonstrating a positive counterbalance to the negative productivity revisions.
The Treasury maintains that Reeves was not misleading in her statements given the constraints of fiscal headroom, although it acknowledges the OBR's position might differ. Additionally, former OBR chief Richard Hughes was not scheduled to respond to MPs' inquiries at that time.
