Watchdog urged to investigate pre-Budget briefing over deficit claims

The City watchdog has faced calls to investigate whether the Treasury misled the public over the size of the fiscal repair job Rachel Reeves faced ahead of this week’s Budget.

In a letter to the Financial Conduct Authority (FCA), the Scottish National Party (SNP) urged the watchdog to look into claims of “deliberately false and misleading” briefings about a £20 billion black hole in the public finances.

The letter comes amid a growing row over pre-Budget speculation that the Chancellor faced a significant gap in her spending plans, partly as a result of a downgrade in productivity forecasts.

That speculation was fed by Ms Reeves when she used a speech on November 4 to suggest tax rises were needed because poor productivity growth would have “consequences for the public finances”.

Warnings had suggested the gap could amount to £20 billion, but on Friday the Office for Budget Responsibility (OBR) revealed it had informed the Chancellor as early as September 17 that the gap was likely smaller than initially expected.

The OBR’s revelation has prompted opposition figures, including Conservative leader Kemi Badenoch, to accuse Ms Reeves of lying to the public.

The deputy leader of Reform UK, Richard Tice, said in a letter to Sir Keir Starmer that “the circumstances surrounding the last few months and the 2025 Budget has been shambolic and shattered confidence for so many” as he urged the Prime Minister to sack Ms Reeves.

“The leaks and briefings from the OBR and Chancellor has been simply incompetent and counterproductive,” Mr Tice wrote.

Downing Street has denied that the Chancellor misled the public, saying she had “talked about the challenges the country was facing”.

In his letter to the FCA, SNP Westminster leader Stephen Flynn accused the Treasury of being responsible for briefing about a “fake” £20 billion black hole and questioned whether Ms Reeves’s speech on November 4 amounted to “market manipulation”.

He said: “That intervention from the Chancellor, alongside the briefings on the need to fill the non-existent £20 billion Treasury black hole, had a significant impact on the financial markets, on business investment decisions, on foreign exchange rates and will likely have fed into the Bank of England decision-making around interest rates which took place two days after her speech.”

Describing the Budget as “built on a lie”, he called for an “immediate investigation into the accusations of false and deeply misleading Budget briefings emanating from a UK Treasury led by the Chancellor Rachel Reeves.”

The FCA declined to comment on Mr Flynn’s letter.

A Treasury spokesperson 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.”