Rachel Reeves has been accused of misleading the country over the state of public finances in the run-up to the Budget.
The Office for Budget Responsibility (OBR) said on Friday that a downgrade in productivity forecasts that the Chancellor had used to illustrate the “challenges” facing the nation had been more than offset by a rise in tax revenues due to inflation.
Richard Hughes, chairman of the OBR, took what he called the “unusual step” of writing to the Treasury select committee to reveal that Reeves had been told in September that the watchdog had only made small downgrades to its overall assessment. Reeves was then told at the end of October she was sitting on a surplus of some £4.2 billion.
The chancellor nonetheless presented the forecasts as unexpectedly bleak and argued for tax rises in the following days, insisting she must “deal with the world as I find it, not the world as I might wish it to be”. She said public finances were in a worse state than expected after “years of economic mismanagement”.
The OBR made clear that after 31 October, no significant alterations were made to its outlook. Reeves ultimately chose to increase taxes by £26 billion at the end of the forecast period.
The Independent has approached the Treasury for comment.
Read MoreStarmer accused of ‘complete betrayal’ by Labour backbenchers after workers’ rights U-turn
Senior minister insists employment rights U-turn does not breach manifesto
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Starmer calls two-child benefit cap a ‘failed social experiment’ that had to go
Key Points
- Chancellor accused of misleading Britain over public finances
- Labour MP says workers have ‘everything to fear’
- Labour MPs condemn Starmer's workers' rights U-turn
- Unions: Legislation 'a shell of its former self'
- Ministers deny manifesto breach
- What have Labour U-turned on?
Chancellor accused of misleading Britain over public finances
13:21 , James ReynoldsThe Chancellor was accused of misleading Britain over her assessment of the state of public finances ahead of the budget.
The Office for Budget Responsibility (OBR) said on Friday that a downgrade in productivity forecasts that Rachel Reeves had used to illustrate the “challenges” facing the nation had been more than offset by a rise in tax revenues due to inflation.
Richard Hughes, chairman of the OBR, wrote to the Treasury select committee and revealed that Reeves had been told in September that the OBR had only made small downgrades to its overall assessment.
Reeves had warned it would have “consequences” for people’s jobs and wages, and said she would have to raise taxes as a result.
Labour faces scrutiny over the decision to raise taxes in the budget, which the Institute for Fiscal Studies (IFS) think tank said amounts to a breach of manifesto promises. The prime minister has refuted the charge.
Breaking: France agrees to stop migrant boats at sea after pressure from Starmer
13:07 , Athena StavrouFrench police will intercept small boats at sea in an attempt to stop migrants crossing the Channel.
A document seen by French newspaper Le Monde, signed by four prefectures in the north of France, agrees that maritime police will start “planned operations” to intercept the dinghies. The push-backs will start initially at sea, and then be conducted in the “inland waters” of ports and channels, the paper reported.
Holly Bancroft has the full story:
France agrees to stop migrant boats at sea after pressure from Starmer
Businesses are changing their recruitment strategies after Budget, poll shows
12:48 , Athena StavrouBusinesses are preparing to slow hiring as a result of measures in the autumn Budget, which puts Britain on course for a record tax burden, a new snap poll suggests.
Some 56 per cent of business leaders said there were likely to be fewer hires than originally planned.
The poll of 500 business leaders was carried out by WPI Strategy and polling firm Merlin Strategy to gauge sentiment among businesses in the immediate aftermath of Wednesday’s Budget statement.
The extended freeze on income tax thresholds is seen as the most damaging impact of the Budget, with 47 per cent of business leaders saying it will have a negative impact on their business and staff, the survey showed.
Despite this, 45 per cent said it was a justified measure to raise revenue.
The poll also showed that 56 per cent of respondents felt it would have been better for the Government to raise income tax but leave all other taxes as they are.
Meanwhile, about two-thirds of business leaders fear they will be targeted with further tax rises in the near future.
What rights will still be given on day one of employment?
12:26 , Athena StavrouThe Employment Rights Bill is now expected to make only parental leave and sick pay available from day one of the job for all workers.
However, protection from unfair dismissal will now only be secured after six months, rather than on day one as was the case when the bill was introduced.
What is Labour’s Employment Rights Bill – and how has it changed?
12:04 , Athena StavrouThe government has come under fire for rowing back on a manifesto commitment as it changes a key element of its landmark workers’ bill.
Here is an overview of how the bill will change the workplace for employees across the UK:
What is Labour’s Employment Rights Bill – and how has it changed?
Backbenchers and union demand u-turn reversal
11:46 , Athena StavrouBackbench MPs and trade union have urged Sir Keir Starmer to reverse his u-turn on workers’ rights.
Labour MP for Middlesbrough and Thornaby East, Andy McDonald, branded the move a “complete betrayal” and vowed to push for its reversal.
He said: “we cannot support that halfway measure”, adding: “This is a wrong-headed move and I will campaign to have this concession reversed.”
Labour affiliated transport and travel union TSSA also urged the government to reinstate its plans to give workers the right to claim unfair dismissal from day one in the job.
“Our union has long campaigned for strong, meaningful rights from the first day of employment, arguing that day one protection is essential to safeguard workers from arbitrary and unjust treatment,” TSSA General Secretary, Maryam Eslamdoust said.
“This remains our position and it’s vital that the government thinks again about this damaging u-turn.”
Business groups welcome concession
11:13 , Athena StavrouBusiness groups welcomed Thursday’s concession, saying the qualifying period of six months was “crucial for businesses’ confidence to hire and to support employment, at the same time as protecting workers”.
The six business groups involved in discussions - including the British Chambers of Commerce, Confederation of British Industry, and Federation of Small Businesses - said the change addresses the “key problem that must be sorted in primary legislation”.
However, they warned that firms would “still have concerns” about many of the powers within the Bill, including thresholds for industrial action, guaranteed hours contracts and seasonal and temporary workers.
Pubs respond to Budget
10:55 , Athena StavrouWestminster news may have already moved on from Budget u-turns to workers’ rights u-turns - but businesses across the country are still trying to understand what Wednesdays announcement means for them.
Some pub owners have called the Budget a “disgrace - mainly attributing their feeling to the increase in minimum wage and some business rates.
Chris Welch, 39, who runs the Fishnet Tavern in north Tyneside told The Independent his business rates evaluation is set to increase by an extra £4,00 each year.
“It’s dark times for pubs and I doubt we will survive past August next year,” he said.
“This budget is a complete let down to small businesses up and down the country.”
Jo Loring, who runs the Cosy Dove in Newcastle, said the increase in his rateable value means he will have to pay £10,000 a year more.
“All of my suppliers are going to feel the same effect and pain,” he said.
“As a result cost of goods will inflate dramatically at wholesale level, this will be reflected at retail level as well. Can we charge more and still maintain custom is the question, the simple answer is no.
“This is now 2 years running that the budget is hitting business hard, to a point where many business people will say there is no reward for growth, or worse still they close as their business is no longer viable.”
Minister on accepting Bill had been 'watered down' by Lords
10:43 , Athena StavrouCabinet minister Bridget Phillipson had promised in September that “we will not accept any watering down by the Lords” of the Employment Rights Bill and “no ifs, no buts”, it would be delivered in full.
She told ITV’s Good Morning Britain on Friday: “We didn’t want to accept watering down by the Lords. What’s been happening in recent days is that discussions have taken place with trade unions, with business and government, in order to find a settled position and a way forward.
“The wider package of measures was too important to jeopardise and there will be progress on unfair dismissal. Currently, it’s two years before you can make a claim, that will come down to six months.”
The Education Secretary added: “What we said in our manifesto around employment rights was that we did want to bring in place day-one protections in a number of areas, but that all of that will be subject to consultation and discussion with businesses, with trade unions, with civil society and that’s precisely what we’ve done.”
Labour U-turn on workers' rights reform was pragmatic decision, says Phillipson
10:29 , Athena StavrouFull story: Starmer accused of ‘complete betrayal’ by Labour backbenchers after workers’ rights U-turn
10:09 , Athena Stavrou Starmer accused of ‘betrayal’ by Labour MPs after workers’ rights U-turn
McDonnell brands U-turn a 'sellout'
09:49 , Athena StavrouFormer shadow chancellor John McDonnell has branded the government’s workers’ rights U-turn a “sell out”.
He wrote on X: “Is this a sellout? Yes it certainly is. If it’s unfair to sack someone, it’s unfair whenever it occurs whether it’s day one or after 6 months. The principle is fairness.”
Is this a sellout? Yes it certainly is. If it’s unfair to sack someone, it’s unfair whenever it occurs whether it’s day one or after 6 months. The principle is fairness. https://t.co/i7XOEgdgwH
— John McDonnell (@johnmcdonnellMP) November 27, 2025
Labour MP Leishman condemns employment rights change as ‘totally unacceptable’
09:30 , Athena StavrouThe Independent’s Whitehall editor Kate Devlin reports:
Labour MP Leishman condemns employment rights change as ‘totally unacceptable’Labour MP Brian Leishman told The Independent the move was “a broken promise.
Totally unacceptable.”It comes just a day after Mr Leishman, previously a serial rebel, praised the Labour government over the Budget.
At the time he described it as “a real Labour budget”.
Workers will have 'every reason to fear' after U-turn, Maskell says
09:16 , Athena StavrouYork MP Rachael Maskell accused the prime minister of going back on a key pledge in Labour’s election manifesto.
Her opposition to the U turn - prompted by an attempt to derail the new employment laws in the House of Lords - could signal trouble for the Government.
Ms Maskell was one of 47 Labour MPs who rebelled against proposed welfare curbs in July, forcing Downing St to back down.
She was suspended as a Labour MP as a result - and had the Party whip restored just three weeks ago.
Ms Maskell said: “I stood on a manifesto where we said we would put day one rights in place and that did include unfair dismissal, so of course I am deeply disappointed to hear these changes have been made.
“Above all this is is coming from the House of Lords, the unelected chamber.”
Ms Maskell said the part of the legislation that was being abandoned - delaying unfair dismissal rights from the first day of employment to six months - was “really important”.
“Employers have nothing to fear from day one rights but workers will have every reason to fear if an employers does not want day one rights,” she told the BBC.
A failure to compromise on workers rights would have 'jeopardised the bill', says Phillipson
09:00 , Athena StavrouThe Independent’s political correspondent Millie Cooke reports:
A failure to compromise on workers rights would have "jeopardised the bill and delayed things further by another year", Cabinet minister Bridget Phillipson has said.
Speaking to BBC Radio 4's Today programme, she insisted that the legislation still "represents the biggest upgrades to workers rights in a generation".
Referencing the decision to abandon day one rights to unfair dismissal, she said: "There's been discussion that's taken place between employers, trade unions and government in order to secure the passage of the Employment Rights Bill."
Because of the change that's been set out, that has been consulted upon and discussed, it now means we can take the bill forward, and that from April next year, millions of working people will have better rights at work around sick pay and parental leave.
"If we hadn't been able to get to a settled position, it could have jeopardised the bill and delayed things further by another year, and we didn't want to see that happen."
Asked whether they had fundamentally broken their manifesto, she said: "No, and sometimes in life, you have to be pragmatic in order to secure wider benefits."
Hospitality industry welcomes changes
08:39 , Athena StavrouThe hospitality sector has welcomed the changes being made to the government’s Employment Rights Bill.
Kate Nicholls, Chair of UKHospitality, said it was a “pragmatic change” addressing one of they industry’s key concerns.
“We made clear representations to the Government that a six-month qualifying period would be much more practical for businesses and maintain job opportunities for young people, and I’m glad they have acted on those concerns,” she said.
“The Employment Rights Bill will still bring substantial changes and extra cost to hospitality businesses. In light of the increases to wages, business rates and other costs coming in April, it would be sensible for the Government to delay the introduction of statutory sick pay from day one by six months.
“This would give businesses much-needed breathing room and avoid further damage to employment opportunities.”
What did Labour's manifesto say?
08:29 , Athena StavrouLabour’s manifesto explicitly promised to “consult fully with businesses, workers, and civil society on how to put our plans into practice before legislation is passed”.
“This will include banning exploitative zero-hours contracts; ending fire and rehire; and introducing basic rights from day one to parental leave, sick pay, and protection from unfair dismissal,” it said.
Implementation of Employment Rights Bill could have been delayed by years, Cabinet minister says
08:18 , Athena StavrouThe Independent’s political correspondent Millie Cooke reports:
There was a “very real prospect” the implementation of the Employment Rights Bill would have been delayed by years if the government had not made a U-turn over day one protections against unfair dismissal, Cabinet minister Bridget Phillipson said.
The education secretary told Sky News: “The Employment Rights Bill is the biggest upgrade to workers’ rights in a generation.
“There has been discussion on the point around unfair dismissal and the time period between businesses, the TUC and Government, and following that discussion there’s been agreement about the way forward, which is welcome.
“It means that the time limit will come down from two years to six months, and that runs alongside important day-one rights around sick pay and around parental leave. But the risk here was that if we didn’t make progress, those important rights wouldn’t come into force from April next year.”
She added: "There was a very real prospect that unless that discussion had taken place and a pragmatic approach was reached, that there would be years delay to that implementation."
What have Labour U-turned on?
08:04 , Athena StavrouMinisters have abandoned plans to give workers day-one protection against unfair dismissal in a U-turn that breaches the Labour manifesto.
Ministers have axed the proposal to cut the “qualifying period” for workers to make an unfair dismissal claim from 24 months to the first day in a new job, in a bid to get the legislation through Parliament.
The Government now intends to introduce the right after six months of service instead, while other day-one rights to paternity leave and sick pay are still set to go ahead, coming into effect in April 2026.
Unions: Legislation 'a shell of its former self'
08:01 , Athena StavrouUnite boss Sharon Graham said the Bill had become “a shell of its former self” while TUC general secretary Paul Nowak said the “absolute priority” was to get the legislation on to the statute books.
“Following the Government’s announcement, it is now vital that peers respect Labour’s manifesto mandate and that this Bill secures royal assent as quickly as possible,” Mr Nowak said.
Ms Graham said: “These constant row-backs will only damage workers’ confidence that the protections promised will be worth the wait. Labour needs to keep its promises.”
Phillipson denies Labour has breached its manifesto with employment rights U-turn
07:56 , Athena StavrouThe Independent’s political correspondent Millie Cooke reports:
Cabinet minister Bridget Phillipson denied that the concession on Labour's flagship employment rights bill was a broken manifesto promise, because Labour’s election document had committed to a consultation.
The manifesto said “we will consult fully with businesses, workers, and civil society on how to put our plans into practice before legislation is passed” but went on: “This will include banning exploitative zero hours contracts; ending fire and rehire; and introducing basic rights from day one to parental leave, sick pay, and protection from unfair dismissal.”
Asked if it was a broken promise, Ms Phillipson said: “In the manifesto, what we said was that we would work with trade unions, with business, with civil society, in consulting on those protections that we’d be bringing forward.
“So, there are both parts to that, within the manifesto, the important rights and the consultation.”
Labour MPs condemn Starmer's workers' rights U-turn
07:55 , Athena StavrouSir Keir Starmer is facing backbench anger after ministers abandoned plans to give workers day-one protection against unfair dismissal in a U-turn that breaches the Labour manifesto.
MPs including a former minister who spearheaded the Employment Rights Bill with ex-deputy leader Angela Rayner voiced concerns over the climbdown announced by the Government on Thursday night.
Labour MP for Middlesbrough and Thornaby East, Andy McDonald, branded the move a “complete betrayal” and vowed to push for its reversal.
He said: “we cannot support that halfway measure”, adding: “This is a wrong-headed move and I will campaign to have this concession reversed.”
Labour MP for Poole, Neil Duncan-Jordan, told the Press Association: “There has been no discussion with the PLP about this.
“The Lords don’t have primacy over a manifesto commitment, so why have we capitulated?”
Labour MP for York Central, Rachael Maskell, told PA: “Employers have nothing to fear from day-one rights, but workers have everything to fear from an employer who doesn’t want day-one rights.”
