eir Starmer has been forced into a panicked pledge to try to cut welfare after his "Benefits Street Budget" triggered a fierce backlash and left Rachel Reeves fighting to keep her job.
The PM will today try to steady his government after the Chancellor denied lying to the public, insisting that she needed to raise taxes to a record level to ensure economic stability.
Sir Keir will use a major speech to argue the welfare system is "trapping young people out of work" and push for removing the "incentives" he says hold them back.
But the tough rhetoric comes only after a furious backlash over Labour’s second Budget, which increased taxes on workers while channeling billions more into welfare—and left Ms Reeves battling allegations she misled the public.
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Almost one million extra people will be pulled into the higher income tax band after Labour chose to keep thresholds frozen, meaning a quarter of the entire workforce will pay 40 percent tax by the end of the decade.
At the same time, the Chancellor sharply increased welfare costs by scrapping the two-child cap.
The storm intensified on Friday when it emerged the Office for Budget Responsibility had privately told The Treasury the public finances were actually in surplus before her decisions—not facing a multi-billion "black hole" she repeatedly used to justify her massive tax increase.
Despite that, she continued to claim she was addressing a huge gap in the nation’s finances—a line now central to accusations she misled the public.
In a tough round of Sunday interviews, the Chancellor insisted she "of course" did not lie.
She told broadcasters: "Anyone who thinks there was no repair job to be done on the public finances, I just don’t accept that."
She said the Budget was needed to build "more resilience, more headroom", adding: "That’s what I did, along with that investment in the NHS and cutting bills for families."
However, The Times revealed senior ministers are also accusing the Chancellor and the PM of misleading the Cabinet over a hole in the public finances.
A Cabinet minister said: "At no point were we told about the reality of the OBR forecasts.
"Had we been told, we might have been in a position to advise against setting hares running on income tax and giving the public the impression we are casual about our manifesto commitments.
"The handling of this Budget has been a disaster from start to finish."
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Another minister added: "The argument about living in uncertain times and needing more headroom makes sense but the way she presented it—by saying there’s a big hole we need to fill—is frustrating."
The Tories have now written to Sir Keir demanding Ms Reeves appear before MPs to explain herself, warning Treasury briefings about a non-existent black hole may even require referral to the Financial Conduct Authority.
Reform UK leader Nigel Farage has separately urged the PM’s ethics adviser to look into potential breaches of the ministerial code, which demands ministers "give accurate and truthful information to Parliament" and are "as open as possible with Parliament and the public".
In his letter, Mr. Farage accused Ms Reeves of "a sustained and deliberate narrative advanced across multiple platforms, after the OBR forecasts were known to the Treasury, and in circumstances where the existence of fiscal headroom was not being disclosed to Parliament or to the public".
Amid mounting calls for Ms Reeves to quit, the PM has been forced into a panicked pledge to slash the welfare bill.
Sir Keir will use a major speech to argue that the benefits system is "trapping young people out of work" and push for removing the "incentives" he says hold them back.
But the tough rhetoric comes only after a backlash over the Budget, which raised taxes on workers while channeling billions more into welfare.
Almost one million extra people will be pulled into the higher income tax band after Labour chose to keep thresholds frozen, meaning a quarter of the workforce will pay 40 percent tax by 2030.
At the same time, the Chancellor sharply increased welfare costs by scrapping the two-child benefit cap.
More than 39,000 Sun readers have participated in our online Budget polls—with 95 percent of them saying Labour has wrecked the economy and 97 percent thinking Ms Reeves should be sacked.
It is laughable to hear him say Rachel Reeves’ Benefits Street Budget has put the country on the right course
Shadow Chancellor Sir Mel Stride
On Friday, it emerged the OBR had privately told the Treasury that the public finances were in surplus before her decisions—not facing a multibillion-pound "black hole" she used to justify her tax increase.
She told broadcasters: "Anyone who thinks there was no repair job to be done on the public finances, I just don’t accept that."
She said the Budget was needed to build "more resilience, more headroom", adding: "That’s what I did."
On one show, Ms Reeves refused to meet Kemi Badenoch’s eye after the Tory leader accused her of lying about the Budget.
The Chancellor looked away as she was stared down before their interviews on the BBC’s Sunday With Laura Kuenssberg.
On Sky, she defended raising taxes, saying: "In the context of a downgrade in our productivity, which cost £16 billion, I needed to increase taxes. I was honest and frank about that in the speech I gave in November."
The Tories have written to Sir Keir demanding Ms Reeves appear before MPs to explain herself, warning Treasury briefings about a non-existent black hole may require referral to the Financial Conduct Authority.
Meanwhile, Sir Keir will attempt to present his welfare pivot as part of a wider plan to "set the country on the right economic course".
He will claim the package will reduce the cost of living with lower energy bills and frozen rail fares.
He will claim the package will reduce the cost of living with lower energy bills and frozen rail fares.
The PM will say his wider mission for the rest of the Parliament revolves around three priorities: driving growth, reshaping welfare and strengthening Britain’s trade ties.
On growth, he will argue that "rooting out excessive costs in every corner of the economy" is vital not only for businesses but for households struggling with rising costs.
Turning to welfare, he will claim the system he inherited "left children too poor to eat and young people too ill to work" and warn that mental-health conditions such as neurodivergence and disabilities are too often used as excuses to write off young workers entirely.
The PM will add: "Any Labour Party worthy of the name cannot ignore that.
"That is why we have asked Alan Milburn on the whole issue of young people, inactivity and work.
"We need to remove the incentives which hold back the potential of our young people."
But the Tories say the plans dodge the biggest drivers of Britain’s £400 billion welfare bill, including long-term sickness and disability costs.
Shadow Chancellor Sir Mel Stride said: "It is laughable to hear him say Reeves’ Benefits Street Budget has put the country on the right course and he wants to fix the welfare system."
He said her £26 billion tax hikes "penalised people who work hard and makes them pay for those who don’t". He added: "And she misrepresented why she was doing it, claiming there was a fiscal black hole."
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