Reeves denies misleading public over OBR headroom

On BBC One’s Sunday with Laura Kuenssberg on 30 November, Chancellor Rachel Reeves said she did not accept claims she misled people about the nation’s finances in the run‑up to the 26 November Budget. Conservative leader Kemi Badenoch renewed her call for Reeves to resign. The argument turns on a technical idea you hear a lot at Budget time: fiscal “headroom”.

If you’re revising for public finance, treat headroom as the buffer between what the government expects to spend under its own fiscal rules and what it expects to raise in tax. A positive margin means the rules are met with some space to spare; a thin margin means any shock can knock plans off course. The Office for Budget Responsibility (OBR) tracks this and publishes the numbers at each fiscal event.

Here’s the backdrop to today’s row. Ahead of the Budget, OBR updates suggested that while long‑term productivity was marked down, stronger wage growth and higher prices were pushing tax receipts up. That mix left a small pre‑measures buffer of around £4.2bn under Reeves’s main rule, not a large gap. Critics say the public heard more about the downgrade than the offsets.

Reeves’s answer is that £4.2bn was simply too little by historical standards. She argues she needed a bigger cushion to deal with shocks and to give the Bank of England room to lower interest rates when conditions allow. After the Budget measures, the OBR now puts the margin at about £21.7bn for 2029/30.

How was that larger buffer built? Through policy choices that raise revenue over time. The OBR material released on Budget day shows tax measures worth roughly £26bn by 2029/30, including a three‑year extension of the freeze to income tax thresholds, which the watchdog says raises around £8bn in that year. This is why you’ll hear people talk about “fiscal drag”.

Reeves also points to decisions that add costs she felt duty‑bound to fund. She highlights scrapping the two‑child benefit limit, with ministers arguing it could lift around 450,000 children out of poverty, alongside reversing earlier plans on Winter Fuel Allowance. She says part of the bill is covered by higher gambling duties and a clampdown on avoidance and evasion.

You asked us a lot about “manifesto vs reality”. Labour pledged not to raise the main rates of Income Tax, National Insurance or VAT-and has stuck to that. But keeping thresholds frozen pulls more pay into tax as wages rise. Reeves told broadcasters she had to face the world “as it is” after weaker productivity, and opponents argue that breaks the spirit, if not the letter, of the pledge.

Politics hasn’t cooled. On the BBC, Badenoch accused Reeves of giving an overly gloomy picture as a smokescreen for tax rises and said she should quit. The Conservatives and SNP have asked the Financial Conduct Authority to examine pre‑Budget briefings and leaks, while Reform UK’s Nigel Farage has urged the independent adviser on ministerial standards to look at whether Reeves breached the ministerial code.

So what did the OBR actually say? In a letter to MPs, the watchdog set out five pre‑Budget assessments this autumn: an early one in October showed a small miss, later ones showed the rules still being met-but only with a very slim margin. In its November outlook, the OBR says the current‑budget rule is now met with about £22bn headroom and a 59% probability, while warning the public finances remain vulnerable to shocks.

Let’s break the Budget process into steps so you can teach it. Step one: officials and the OBR produce a pre‑measures forecast-the “world as it stands”. Step two: ministers choose policies that change that world, and the OBR scores the impact. The final numbers include both. Headroom is not spare cash; it’s a safety margin against rules the government has set for itself.

What this means for you. The threshold freeze matters because pay rises can drag more of your income into higher tax bands even if rates don’t change. Mortgage‑holders and businesses care about the buffer too: Reeves argues a stronger margin supports stability and, over time, better conditions for rate cuts if inflation keeps easing. Always check which claim is about rates and which is about thresholds.

What to watch next. Downing Street is expected to back the Budget line again on Monday 1 December, while Parliament and regulators decide whether to pick up any of the opposition’s complaints. If you’re following along for class, keep an eye on FCA correspondence, any referral to the standards adviser, and the OBR’s detailed tables-they’re the best way to compare claims with the official record.