The City watchdog is facing calls to investigate whether the Treasury misled the public regarding the scale of the fiscal challenge ahead of this week’s Budget.
The Scottish National Party (SNP) has urged the Financial Conduct Authority (FCA) to examine claims of “deliberately false and misleading” briefings concerning a purported £20 billion “black hole” in the public finances.
This demand comes amid a growing controversy surrounding pre-Budget speculation that the Chancellor, Rachel Reeves, was grappling with a significant shortfall in her spending plans, partly attributed to downgraded productivity forecasts.
Ms Reeves herself fuelled this speculation in a speech on November 4, suggesting that poor productivity growth would necessitate tax rises due to its “consequences for the public finances.”
Warnings had indicated a potential £20 billion gap. However, the Office for Budget Responsibility (OBR) revealed on Friday that it had informed the Chancellor as early as September 17 that the fiscal gap was likely smaller than initially anticipated.
This disclosure has prompted opposition figures, including Conservative leader Kemi Badenoch, to accuse Ms Reeves of misleading the public. Downing Street has denied these claims, stating that Ms Reeves “talked about the challenges the country was facing.”
In his letter to the FCA, SNP Westminster leader Stephen Flynn accused the Treasury of briefing about a “fake” £20 billion black hole and questioned whether Ms Reeves’s November 4 speech amounted to “market manipulation.”
He stated: “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”, Mr Flynn 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, and the Treasury has been contacted for comment.