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Calls to investigate allegations the Treasury misled the public

Calls to investigate allegations the Treasury misled the public

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The city watchdog faces calls to investigate whether the Treasury misled the public about 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 allegations of “deliberately false and misleading” reporting about an alleged £20bn “black hole” in the public finances.

This lawsuit comes amid growing controversy surrounding pre-Budget speculation that Chancellor Rachel Reeves was dealing with a significant shortfall in her spending plans, attributed in part to downgraded productivity forecasts.

Ms Reeves herself fueled this speculation in a speech on 4 November, suggesting that poor productivity growth would require tax increases due to their “consequences for public finances”.

Rachel Reeves gave pre-Budget briefings earlier this week (fake images)

Warnings had indicated a potential gap of £20 billion. 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 revelation has led opposition figures, including Conservative leader Kemi Badenoch, to accuse Reeves of misleading the public. Downing Street has denied these claims and said Ms Reeves “spoke about the challenges facing the country”.

In his letter to the FCA, SNP Westminster leader Stephen Flynn accused the Treasury of reporting a “false” £20bn black hole and questioned whether Ms Reeves' speech on November 4 amounted to “market manipulation”.

He stated: “That intervention by the Chancellor, together with briefings on the need to fill the Treasury's non-existent £20bn black hole, had a significant impact on financial markets, on business investment decisions, on exchange rates and will probably have influenced the Bank of England's decision-making on 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 allegations of false and deeply misleading budget reporting emanating from the UK Treasury led by Chancellor Rachel Reeves”.

The FCA declined to comment on Flynn's letter and the Treasury was contacted for comment.