Rachel Reeves has rejected claims she misled voters about the public finances before last week’s Budget. In Sunday broadcast interviews she said she was transparent about the numbers, while Conservative leader Kemi Badenoch repeated her call for the chancellor to resign. The Financial Times reports that Sir Keir Starmer will back the Budget in a speech on Monday, framing it as fiscal stabilisation.

The timeline matters for investors. ITV News reported the Office for Budget Responsibility (OBR) told the Treasury on 17 September that stronger wage growth and tax receipts were offsetting much of the productivity downgrade; by late October the watchdog’s draft showed the fiscal rules would still be met. The OBR’s own November report says the pre‑measures margin against the current budget rule was around £4bn. Reuters has also cited a £4.2bn figure used in private briefings.

Headroom is the small buffer a chancellor leaves to meet the fiscal rules-now centred on running a current budget surplus by 2029–30. On the OBR’s pre‑measures forecast, that buffer was about £4bn, which is tight by recent standards. After policy changes, the OBR places the post‑measures margin at roughly £22bn in 2029–30; Reeves herself has referred to £21.7bn. The OBR notes this pushes the margin closer to the post‑2010 average.

What changed on 26 November is straightforward. The Budget extended the freeze on income tax thresholds to 2030–31 and announced a package of tax rises worth about £26bn a year by the end of the forecast, while also abolishing the two‑child benefit limit from April 2026. The OBR’s analysis was accidentally posted online before the statement, prompting a formal apology from the watchdog.

Why the threshold freeze matters for pay packets. Because bands don’t move with wages, more people are pulled into paying tax or into higher rates-fiscal drag. Sky News and the OBR estimate the extended freezes raise about £7.6–£8.3bn in 2029/30 and, by 2030–31, bring roughly 5.2m more people into income tax, 4.8m more into the higher rate and 600,000 more into the additional rate.

On welfare, the OBR puts the cost of scrapping the two‑child limit at around £3bn by 2029–30 and says about 450,000 children will be lifted out of poverty versus leaving the cap in place. Ministers say part of the bill is covered by higher gambling duties and a clampdown on avoidance. Reuters and the Evening Standard summarised these costings after the Budget.

Opposition figures call this a pitch‑roll. Badenoch says Reeves “lied to the public”; Tory shadow chancellor Mel Stride has written to the FCA seeking a probe into possible market abuse over pre‑Budget briefings. SNP Westminster leader Stephen Flynn has also asked the regulator to investigate, and Reform UK’s Nigel Farage has urged the prime minister’s standards adviser to examine any potential ministerial‑code breach. The FCA has not confirmed any investigation.

Markets took the Budget in their stride. After the OBR’s early publication and the statement itself, gilts rallied and sterling firmed as some bearish positions were unwound. Yahoo Finance and Reuters-linked coverage recorded 10‑year yields around 4.4–4.5% and a drop of roughly 11bps in the 30‑year benchmark on the day, while City desks described the package as avoiding bigger risks.

This is why headroom is not a technical footnote. The UK’s debt stock is large and sensitive to rate moves; investors want a cushion. The OBR puts the post‑measures margin near £22bn in 2029–30, and the ONS estimates public sector net debt at about £2.9tn-94.5% of GDP-in October 2025. That combination explains why gilts focused on the size of the buffer as much as the policy mix.

For households, the freeze means pay rises feel thinner from 2028 as more income is taxed. Higher‑rate and additional‑rate thresholds catch more earners, and some pensioners could be pulled into tax if the state pension outpaces the personal allowance. The OBR’s figures on fiscal drag, cited by Sky News and the FT, give a clearer sense of the scale than any political argument.

For SMEs and finance directors, two practical takeaways. First, treat “headroom” as a risk buffer, not spare cash: base‑case 2026–30 plans on a higher effective tax take from fiscal drag and on borrowing costs that hover near current levels, with sensitivity to moves of ±50bps in gilt yields. Second, if you rely on variable‑rate debt or rolling hedges, consider whether the post‑Budget dip in yields is an opportunity to term out exposure rather than a signal to add leverage.

What’s next. The FT says Starmer will defend the package and trail longer‑term growth measures; the OBR has launched an inquiry into its publication error; and the City watchdog has received letters from multiple parties but has not announced any action. The political row over what Reeves said in early November versus what she knew in September will continue, but bond desks will watch delivery against the fiscal rules.