The chancellor has insisted to Sky News that she did not lie to the public about the state of the public finances ahead of the budget.

Rachel Reeves is facing widespread accusations that in a speech from Downing Street on 4 November in which she laid the groundwork for tax rises, she lied about the state of the public finances.

Asked directly by Sky’s Trevor Phillips if she lied, she said: “Of course I didn’t.”

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Ms Reeves said the decision by the independent Office for Budget Responsibility (OBR) to review and downgrade productivity meant that the forecast for tax receipts was £16bn lower than expected, and said she needed tax rises to create more fiscal headroom to reassure the financial markets and create stability in the economy.

But coupled with other changes in the fiscal forecast, the chancellor knew there was a £4bn budget surplus when she delivered her Downing Street speech, and Trevor challenged her on why she did not say that to the nation, and argue that more headroom was needed.

She replied: “I said in that speech that I wanted to achieve three things in the budget – tackling the cost of living, which is why I took £150 off of energy bills and froze prescription charges and rail fares.

“I wanted to continue to cut NHS waiting lists, which is why I protected NHS spending. And I wanted to bring the debt and the borrowing down, which is one of the reasons why I increased the headroom.

“£4bn of headroom would not have been enough, and it would not give the Bank of England space to continue to cut interest rates.”

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