Reeves says decision not to raise income tax taken by her and Starmer ‘as a team’
John Glen (Con) goes next. He says he cannot see what new “data points” the chancellor had between 4 November, when the chancellor gave her speech implying income tax would go up, and 13 November, when the FT said that plan had been dropped. He says the forecasts from the OBR imply those data points had not changed.
Reeves says the published forecast figures were not the only relevant data points. She says there were also OBR costings for proposed policies.
As you’ll know from your time at the Treasury, pre-measures is not the final word from the Office for Budget Responsibility, because then you have post-measures forecasts.
They take into account the policy decisions that we take as a government on tax and spend … so there was plenty of additional information being shared between the OBR and the Treasury between 30 October and major measures one and indeed major measures two.
Q: What changed between 4 November and 13 November?
Reeves says she was clear on 4 November that everyone would have to contribute.
She claims that was not a breach of the manifesto.
Q: The manifesto said you would not raises taxes for working people?
Reeves ignores this point, and says she was clear in her speech on 4 November on the need to build more headroom into the plan, and on the need for everyone to contribute.
She says they did look at putting up income tax.
But they were able to keep the contribution from working people as low as possible.
Q: Who made the decision?
Reeves says she was meeting the PM two or three times a week at this point. They decided this “as a team”, because that is what they are.
UPDATE: Reeves said:
The prime minister and I met two, three times a week during the budget process. That is not always the case between chancellors and prime ministers. I recognise that. But there is a very close partnership between myself and the prime minister. And so we took him through all of the numbers and all of the options and we decided it together as a team, because that is what the prime minister and I am.
Key events
After PMQs, Wes Streeting, the health secretary, will make a statement to MPs at about 12.30pm about the strike by resident doctors in England.
John Glen (Con) is now asking about gambling taxes.
Q: Isn’t there a risk that you will just drive a lot of gambling offline?
Reeves says there was a consultation about this. They decided not to impose new taxes on in-person gambling, or horse racing. And taxes were cut for bingo because of the social benefits.
But taxes were raised for online betting, she says.
She says elsewhere in the budget there were proposals to protect the high street from online competition.
She says she could have made the online taxes higher. But she did not, because of the concerns raised by Glen.
Q: Do you expect to see a restructuring in the industry now as a result? Some companies are going offshore?
Reeves says the taxes apply whether the firm is based onshore or offshore. That was part of the design, she says.
Everything has consequences, she says. But so do the harms of gambling.
Siobhain McDonagh (Lab) goes next. She asks if it is unfair for the £20,000 full cash Isa allowance to be preserved for people aged 65 or older, but not for younger people, who will have a cash Isa allowance of £12,000, and who will have to put the other £8,000 of their Isa allowance into stocks and shares. She suggests that is unfair to young people.
Reeves says she does not think there are many young people who can put £20,000 a year into an Isa.
She says the Treasury decided to exempt people aged 65 or over from the new restrictions because, at that age, people might need to be able to withdraw Isa savings quickly. She says the policy is intended to encourage other savers to put more money into stocks and shares, where value will build up more over time.
Reeves rejects claim raising income tax would have been more progressive than threshold freeze
John Glen (Con) asks how Reeves can say she has not breached the Labour manifesto.
Reeves says the manifesto clearly referred to rates of income tax, national insurance and VAT.
Q; Do you accept increasing the headline rate of income tax would be more progressive than freezing thresholds?
This is a claim made by the Resolution Foundation.
Reeves says she does not accept that.
Here is the Resolution Foundation chart showing why an income tax rise would have been more progressive.
Jim Dickson (Lab) is asking the questions now.
Q: Are you worried about the impact of your measures on the squeezed middle?
Reeves says this is the first time Dickson (MP for Dartford) has spoken to her without mentioning the Lower Thames Crossing (which the government is backing).
She accepts that she has asked everyone to make a contribution.
Bobby Dean (Lib Dem) comes in on this topic.
Q: Would it be a good idea for the Treasury distributional analysis to look at the impact of measures on the richest 1%, or the richest 0.1%.
Reeves says it is hard to get data on the very richest, because it is a small group of people.
Yuan Yang asks about special educational needs and disabilities (Send) provision costs.
Reeves says the OBR figures on this assumed that the costs would be absorbed just within one budget. That will not happen, she says.
She says the Send review will deliver a system that works for families, children and schools. The education secretary is leading on this.
She says too many parents are let down by the Send system. MPs know this from the postbag they get. “The system just doesn’t work,” she says. She says her mum was as special needs teacher when Reeves was young. But she became a classroom teacher instead because, even then, special needs education was being cut.
Bobby Dean (Lib Dem) goes next.
Q: Do you accept that you had too little headroom in your spring statement?
Reeves says she cannot remember other parties (like Dean’s) calling for higher taxes at the time. She thinks she got it right.
But the headroom has been increased to £21.7bn, she says.
Yuan Yang (Lab) goes next.
Q: The OBR decided this year to use a higher threshold for deciding whether or not a policy will lead to higher growth. Did they consult you about that?
Reeves says what matters most is not how the OBR scores policies but whether or not they actually promote growth.
She lists a string of measures which she says will lead to higher growth, including the three trade deals, which she says she thinks will have “a significant impact”.
John Glen is also asking about spending. He says the budget implies there will be very tough spending settlements outside health, defence and education.
Reeves says the spending settlements have been decided. She says departments are always under pressure.
Q: But, outside defence, health and education, settlements will be as tough as they were between 2010 and 2015 (in the George Osborne austerity era).
Reeves says there was an uplift in spending when the government came into office.
Reeves rejects claim budget contains unrealistic plans to restrict public spending at end of decade
John Grady (Lab) is asking the questions now. He asks Reeves how she responds to the claims from economists that the retraction in government spending she has pencilled in for the end of the decade is realistic. Do you believe those economists are wrong?
Reeves says she believes in the numbers in her budget.
This is what Faisal Islam, the BBC’s economics editor, is saying about Reeves’s comment about the revenue boost to the Treasury from higher inflation. (See 10.21am.)
Chancellor is saying that the OBR’s productivity downgrade was different to the inflation-linked buoyancy of tax revenues…
Suggests that Treasury caution would have accounted for the full hit from productivity, but have been more cautious about banking an inflation-linked revenue boost, especially before the measures were costed… essentially a defence of the Nov 4th scene setter speech focus on productivity downgrade.
Reeves rules out putting capital gains tax on primary residences, and moving to pensions ‘single lock’
Baldwin says Reeves chose not to put pro-growth measures in the budget.
Reeves says she does not accept that. That is not what she said, she says. She cites measures such as the decision to go ahead with the third runway at Heathrow as growth measures.
Q: Do you accept that your pre-budget comments led to businesses putting investment on hold?
Reeves says the previous government raised taxes to a record high.
She says she has returned stability to the economy.
Interest rates have been cut, she says. She says under Liz Truss, who Baldwin “may not want to remember”, interest rates went through the roof.
Baldwin says last year she asked Reeves if she was looking at changing council tax, or road prices. Reeves told the committee she was not looking at those. Baldwin says she would argue the budget shows Reeves is doing those things.
Baldwin asks Reeves to rule out putting capital gains tax on primary residences, or moving to a single lock for state pensions, in this parliament.
Reeves does rule those out.
Harriett Baldwin (Con) goes next.
She says there were no measures in the budget to boost growth.
Reeves does not accept that. She says the growth forecast has gone up for 2025.
Reeves says decision not to raise income tax taken by her and Starmer ‘as a team’
John Glen (Con) goes next. He says he cannot see what new “data points” the chancellor had between 4 November, when the chancellor gave her speech implying income tax would go up, and 13 November, when the FT said that plan had been dropped. He says the forecasts from the OBR imply those data points had not changed.
Reeves says the published forecast figures were not the only relevant data points. She says there were also OBR costings for proposed policies.
As you’ll know from your time at the Treasury, pre-measures is not the final word from the Office for Budget Responsibility, because then you have post-measures forecasts.
They take into account the policy decisions that we take as a government on tax and spend … so there was plenty of additional information being shared between the OBR and the Treasury between 30 October and major measures one and indeed major measures two.
Q: What changed between 4 November and 13 November?
Reeves says she was clear on 4 November that everyone would have to contribute.
She claims that was not a breach of the manifesto.
Q: The manifesto said you would not raises taxes for working people?
Reeves ignores this point, and says she was clear in her speech on 4 November on the need to build more headroom into the plan, and on the need for everyone to contribute.
She says they did look at putting up income tax.
But they were able to keep the contribution from working people as low as possible.
Q: Who made the decision?
Reeves says she was meeting the PM two or three times a week at this point. They decided this “as a team”, because that is what they are.
UPDATE: Reeves said:
The prime minister and I met two, three times a week during the budget process. That is not always the case between chancellors and prime ministers. I recognise that. But there is a very close partnership between myself and the prime minister. And so we took him through all of the numbers and all of the options and we decided it together as a team, because that is what the prime minister and I am.
Q: Will you publish your leak inquiry findings?
Bowler says he will publish the findings of his review of budget security.
But he does not commit to publishing the inquiry findings.
Hillier says her committee would like to see those findings anyway. She says her committee does not leak.
Before the budget, the Treasury had higher revenues than expected because of inflation.
But Reeves says she did not regard that as good news. The government wants lower inflation, she says.
Q: You told the BBC on 10 November that you could keep your manifesto commitments, but that would need deep cuts to capital spending. Which option did you choose?
Reeves says she said everyone would have to make a contribution. But she kept that to a minimum.
Q: So of those two options, which did you choose? Or did you choose other options?
Reeves says there are always other options.
By freezing the thresholds, she asked everyone to contribute.
She says the Tories froze thresholds for seven years. She has frozen them for another three years.
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