Rachel Reeves, the UK’s Chancellor of the Exchequer, has found herself at the center of a political storm following a series of damaging leaks and a dramatic U-turn on income tax policy in the run-up to her pivotal autumn 2025 budget. Speaking before Parliament’s Treasury Select Committee on December 10, Reeves condemned the unauthorized disclosures as "unacceptable" and revealed that her decision not to raise income tax was made in "very close partnership" with Prime Minister Keir Starmer.
"I want to reiterate in the strongest terms that leaks are unacceptable," Reeves told MPs, expressing frustration at the speculation and misinformation that swirled before her budget announcement. According to The Guardian, she added, "The budget had too much speculation, there were too many leaks, and much of the leaks and speculation were inaccurate. [It was] very damaging, as well as the IT security issues."
Reeves’s budget had been widely anticipated as a make-or-break moment for the government’s fiscal credibility. In the weeks leading up to her November speech, Reeves herself stoked speculation about a potential income tax rise, warning in a set-piece address that plugging the public finance gap could require "difficult decisions." The Financial Times later reported that the plan to increase income tax—potentially for the first time in 50 years—had been dropped at the eleventh hour, triggering a sharp sell-off in bond markets as investors fretted over the government’s fiscal stance.
"It was not an off-the-record briefing, it was a leak. I’m absolutely categorical that that was not an authorised briefing," Reeves said, responding to questions about the Financial Times report. She described the leak as "incredibly damaging" and emphasized her determination to prevent such incidents in the future. "I want to say on the record how frustrated I am and have been by these incidents and the volume of speculation and leaks, and that is why I am doing something about it, because we cannot allow this to happen again."
The fallout from the leaks has been significant. In the chaotic weeks after the budget, Richard Hughes, chair of the Office for Budget Responsibility (OBR), resigned after taking responsibility for the inadvertent early release of the OBR’s assessment of the chancellor’s plans—an incident that occurred just before Reeves delivered her measures in the Commons. Reeves confirmed that a replacement for Hughes was unlikely to be found before her spring 2026 statement. In the meantime, both the Treasury and the independent watchdog have launched inquiries into the leaks, with the investigation covering ministers, civil servants, and advisers. Treasury permanent secretary James Bowler confirmed that the inquiry would leave "no stone unturned."
Throughout the budget process, Reeves maintained a close working relationship with Starmer, meeting with the prime minister two to three times a week to discuss the evolving fiscal strategy. "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," Reeves told MPs. She added, "We decided it together as a team because that is what the Prime Minister and I am."
The chancellor’s decision to abandon the income tax rise was ultimately based on the assessment that other tax measures would generate sufficient revenue to meet fiscal rules. "We did look at whether we needed to increase the rates of income tax given our concerns around the forecast … In the end that was not necessary," Reeves explained. Instead, the government opted to extend a freeze on tax thresholds—a move that, while less politically explosive than a rate hike, still represents a significant fiscal tightening.
Despite ruling out an income tax rise, Reeves has left the door open to further tax increases or spending cuts if the public finances deteriorate. "I reserve the right to be able to take action at any point. But I believe the headroom we have, and the changes we have made, means we won’t have to take that action in the spring. But of course I reserve the right at any time to take action," she stated, referencing the nearly £22bn of headroom left against her fiscal rule at the autumn budget. Notably, Reeves has also scrapped the OBR’s verdict on whether the government’s fiscal target is being met for the spring statement, giving herself more flexibility in the face of economic uncertainty.
Some measures are firmly off the table, at least for now. Reeves categorically ruled out charging capital gains tax on primary residences and scrapping the pensions triple lock during the current parliament—two policies that would be deeply unpopular with key voter groups. However, she confirmed the government’s intention to introduce legislation as soon as possible to enact new tax changes, including a council tax surcharge on properties worth more than £2 million and a 3p-a-mile levy on electric vehicles. "That is also very important to give confidence that these tax increases will indeed happen and that public services will indeed live within the means that I have set," Reeves said.
The chancellor’s fiscal plans have come under intense scrutiny from both economists and political opponents. Leading analysts have warned that her budget entails large tax increases and tight spending restraint in the immediate run-up to the next general election, raising the possibility that some measures could be unpicked for political reasons. Meanwhile, the Conservative Party has seized on the controversy, with a Tory-led censure motion in the Commons on December 10 calling on Reeves to apologise for the way the budget unfolded. Shadow chancellor Sir Mel Stride accused Reeves of putting "party before country," stating: "Rachel Reeves has repeatedly misled the British public. She promised she wouldn’t raise taxes on working people – and then she did. She insisted there was a black hole in the public finances – and there wasn’t."
The OBR’s own pre-budget forecasting suggested that Reeves’s spending plans would, in fact, run a surplus due to changing economic headwinds, contradicting the chancellor’s narrative of an urgent fiscal "black hole." Reeves responded by emphasizing the extensive information sharing between the OBR and the Treasury in the weeks leading up to the autumn statement. "Pre-measures is not the final word from the Office for Budget Responsibility, because then you have post-measures forecasts," she told MPs. "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 October 30 and major measures one and indeed major measures two."
As the dust settles from a tumultuous budget season, Reeves’s credibility—and the government’s broader fiscal strategy—remain under the microscope. With leak inquiries ongoing, a new OBR chair still to be appointed, and the prospect of further political battles ahead, the chancellor faces a delicate balancing act in the months to come. For now, she insists her partnership with Starmer is strong and her fiscal headroom sufficient, but the debate over how best to manage the UK’s public finances is far from over.