Starmer to face Badenoch at PMQs after Reeves hits out at Budget leaks – live updates
Reeves stands by decision to raise taxes in part to increase fiscal headroompublished at 11:43 GMT
Michael Race
Business and economics reporter
The chancellor has defended her decision to increase taxes, in part to raise the so-called headroom she has against her borrowing rules.
The buffer, which is essentially the rainy day fund for chancellors to fall back on, has been smaller in recent years and was forecast by the Office for Budget Responsibility (OBR) to be £4.2bn in its pre-Budget forecast.
Prior to November 2022, chancellors have tended to create a £20bn to £30bn buffer so that in event of economic shocks, or unexpected spending rises, the public finances remain balanced.
Last week, a senior figure at the OBR said while the £4.2bn was in positive territory, it still “posed a significant” challenge to the chancellor and was a “tiny margin”.
The buffer was also less than the £9.9bn Reeves had previously left.
The OBR also said the £4.2bn buffer would have been reduced to minus £3bn because the OBR’s forecast did not take into account the welfare and winter fuel payment U-turns made by the government.
Critics of Rachel Reeves have argued she misled the public by not mentioning in her press conference ahead of the Budget that she was on track to meet her borrowing rules by the £4.2bn figure.
But the chancellor has argued one of the goals of her Budget was to increase this figure – i.e. the buffer.
