UK's Starmer says he is proud of budget and public was not misled

By Alistair Smout and Elizabeth Piper

LONDON, Dec 1 (Reuters) - British Prime Minister Keir Starmer said on Monday he was proud of last week's budget, defending not only what he described as the "fair choices" in it but also his finance minister, accused of misleading the public before the release of her fiscal plans.

At a press conference at a neighbourhood centre in London, Starmer sought to convince the public that the budget - which ducked an increase in income tax but raised taxes in other areas - would help tackle child poverty, protect public services and offer a larger fiscal buffer to secure stability.

But while he tried to move the focus onto future welfare reform and cutting business regulation, he was repeatedly questioned on whether finance minister Rachel Reeves had misled the public by presenting a fiscal black hole as being larger than that suggested by independent forecasts.

"I am proud ... I am proud that our public finances and our public services are moving in the right direction because we confronted reality, we took control of our future and Britain is now back on track," Starmer said to applause.

REEVES STILL THE FOCUS OVER ALLEGATIONS SHE MISLED PUBLIC

He said voters would start to feel the benefits of his Labour government's approach in the year ahead and "see a country that no longer feels the burden of decline".

But it was the position of Reeves, who has rejected accusations by opposition politicians that she lied over Britain's financial situation in the build-up to the November 26 budget, that became the focus of the press conference.

Reeves used her budget to increase taxes by 26 billion pounds ($34 billion). The run-up to the event had been dominated by talk she needed to fill a fiscal black hole, but the official forecaster, the Office for Budget Responsibility, released a letter last week that showed the public finances were in better shape.

Opposition politicians have called for her to resign, saying she misled the public and the markets.

The populist Reform UK Party has called on the independent ethics adviser to open a probe into whether she breached the ministerial code. The opposition Conservative Party has also accused Reeves of lying to the public.

STARMER DETAILS DECISION-MAKING PROCESS

Starmer gave details of the decision-making process, saying discussions began over the shape of the budget when a productivity forecast from the Office for Budget Responsibility showed a 16 billion pound loss.

He said that meant both he and Reeves had to think about possibly breaching the party's 2024 election promise and raising income tax - something later data suggested was not necessary. He also said the government needed a larger fiscal buffer to offer stability and to cover the "fair" welfare decisions.

"There was no misleading," he said after being asked repeatedly by journalists.

The prime minister was more keen to focus attention on the future, telling businesses he would cut the red tape holding back investment and development, describing helping young people back into work as a "moral mission" and promising closer ties with the European Union, saying Brexit had hurt the economy.

He offered little detail on how he intended to keep his own lawmakers on board as he tackles a welfare system that is expected to cost more than 310 billion pounds in 2025 to 2026. An attempt to reduce the bill was thrown out in July after a rebellion among his lawmakers.

Many of those lawmakers were happier than expected with the budget, especially over a move to scrap the two-child limit on welfare payments, but the party faces possibly difficult local elections in May next year that will be another pressure point.

Opinion polls show Labour well behind Reform UK and the chaotic build-up to the budget, marked by U-turns and frequent briefings to the media, has prompted some to question Starmer's communication strategy before the next national election, due in 2029.

Starmer sought on Monday to offer a brighter future, saying his government's sometimes difficult policies would soon bear fruit.

"Bit by bit, you will see ... a Britain with its confidence and its future back."

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(Writing by Elizabeth Piper and Kate HoltonEditing by Frances Kerry)