🔗 Share this article

The allegation carries significant weight: suggesting Rachel Reeves may have lied to the British public, spooking them to accept billions in extra taxes that would be spent on increased benefits. However exaggerated, this isn't usual political sparring; on this occasion, the consequences are higher. Just last week, detractors aimed at Reeves and Keir Starmer had been labeling their budget "a mess". Today, it is denounced as lies, with Kemi Badenoch demanding the chancellor to quit.

This grave charge requires straightforward responses, therefore here is my assessment. Did the chancellor tell lies? Based on the available information, apparently not. There were no whoppers. However, despite Starmer's yesterday's comments, it doesn't follow that there's nothing to see and we can all move along. The Chancellor did mislead the public about the considerations informing her decisions. Was it to channel cash to "benefits street", like the Tories claim? No, and the numbers demonstrate it.

A Standing Takes A Further Blow, But Facts Must Prevail

Reeves has sustained a further blow to her standing, however, should facts continue to matter in politics, Badenoch should call off her attack dogs. Perhaps the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will quench SW1's appetite for scandal.

Yet the real story is far stranger compared to media reports suggest, extending wider and further than the careers of Starmer and his class of '24. Fundamentally, this is a story concerning how much say the public have over the governance of the nation. This should concern everyone.

Firstly, on to Brass Tacks

When the OBR released recently some of the forecasts it provided to Reeves as she prepared the budget, the surprise was instant. Not only had the OBR not acted this way before (an "exceptional move"), its figures seemingly contradicted the chancellor's words. Even as rumors from Westminster suggested how bleak the budget would have to be, the watchdog's predictions were getting better.

Consider the Treasury's so-called "unbreakable" rule, that by 2030 day-to-day spending for hospitals, schools, and the rest must be completely funded by taxes: in late October, the watchdog calculated this would just about be met, albeit only by a minuscule margin.

A few days later, Reeves held a media briefing so unprecedented that it caused breakfast TV to break from its regular schedule. Weeks before the real budget, the nation was warned: taxes would rise, and the primary cause cited as pessimistic numbers from the OBR, in particular its finding suggesting the UK had become less productive, putting more in but yielding less.

And lo! It happened. Despite what Telegraph editorials combined with Tory media appearances suggested recently, this is basically what happened during the budget, that proved to be significant, harsh, and grim.

The Misleading Alibi

The way in which Reeves misled us was her alibi, since these OBR forecasts didn't compel her actions. She might have made other choices; she could have given other reasons, even on budget day itself. Prior to the recent election, Starmer promised precisely this kind of people power. "The hope of democracy. The power of the vote. The possibility for national renewal."

One year later, yet it is powerlessness that is evident from Reeves's pre-budget speech. The first Labour chancellor in 15 years portrays herself to be an apolitical figure at the mercy of forces outside her influence: "Given the circumstances of the long-term challenges with our productivity … any finance minister of any political stripe would be standing here today, facing the choices that I face."

She did make a choice, only not one the Labour party wishes to publicize. From April 2029 British workers and businesses will be paying another £26bn annually in tax – and most of that will not go towards spent on improved healthcare, public services, nor enhanced wellbeing. Regardless of what bilge is spouted by Nigel Farage, Badenoch and others, it is not being lavished upon "welfare claimants".

Where the Money Really Goes

Instead of being spent, over 50% of the extra cash will in fact provide Reeves a buffer for her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the government's own U-turns. Reviewing the watchdog's figures and being as generous as possible towards Reeves, only 17% of the taxes will fund genuinely additional spending, for example scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, as it had long been a bit of theatrical cruelty by George Osborne. This administration could and should have binned it immediately upon taking office.

The Real Target: The Bond Markets

The Tories, Reform along with all of Blue Pravda have been barking about how Reeves fits the caricature of Labour chancellors, taxing strivers to fund the workshy. Party MPs are applauding her budget for being a relief to their troubled consciences, safeguarding the disadvantaged. Each group are completely mistaken: The Chancellor's budget was largely aimed at asset managers, speculative capital and the others in the financial markets.

Downing Street could present a compelling argument for itself. The margins provided by the OBR were insufficient to feel secure, especially considering lenders demand from the UK the highest interest rate of all G7 developed nations – exceeding that of France, which lost its leader, higher than Japan which has way more debt. Coupled with the policies to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say this budget enables the Bank of England to reduce interest rates.

It's understandable that those folk with red rosettes might not frame it this way when they're on #Labourdoorstep. As a consultant to Downing Street puts it, Reeves has effectively "utilised" the bond market to act as an instrument of discipline over Labour MPs and the electorate. It's the reason the chancellor cannot resign, regardless of which promises she breaks. It's the reason Labour MPs will have to fall into line and vote that cut billions from social security, as Starmer indicated yesterday.

Missing Political Vision , a Broken Pledge

What is absent from this is the notion of strategic governance, of harnessing the finance ministry and the Bank to forge a fresh understanding with markets. Also absent is intuitive knowledge of voters,