🔗 Share this article

This accusation represents a grave matter: suggesting Rachel Reeves may have misled the British public, scaring them into accepting billions in additional taxes which could be used for increased welfare payments. However hyperbolic, this isn't usual Westminster bickering; this time, the consequences are higher. A week ago, critics aimed at Reeves and Keir Starmer had been calling their budget "chaotic". Today, it is branded as falsehoods, and Kemi Badenoch demanding the chancellor's resignation.

Such a grave accusation requires straightforward responses, so let me provide my view. Did the chancellor lied? Based on the available information, apparently not. There were no whoppers. But, despite Starmer's yesterday's comments, that doesn't mean there's no issue here and we can all move along. The Chancellor did mislead the public regarding the considerations shaping her decisions. Was this all to channel cash towards "welfare recipients", as the Tories assert? Certainly not, and the numbers demonstrate it.

A Reputation Takes A Further Hit, Yet Truth Should Win Out

The Chancellor has taken a further hit to her reputation, however, if facts continue to matter in politics, Badenoch should stand down her attack dogs. Maybe the stepping down yesterday of OBR head, Richard Hughes, over the unauthorized release of its own documents will quench SW1's appetite for scandal.

But the true narrative is much more unusual than the headlines indicate, and stretches wider and further beyond the political futures of Starmer and his 2024 intake. Fundamentally, this is an account about what degree of influence you and I have over the governance of the nation. This should concern you.

First, to Brass Tacks

When the OBR published recently some of the projections it provided to Reeves while she prepared the red book, the surprise was immediate. Not merely had the OBR not acted this way before (described as an "unusual step"), its figures apparently went against Reeves's statements. While leaks from Westminster suggested how bleak the budget would have to be, the OBR's own predictions were improving.

Take the Treasury's so-called "iron-clad" rule, that by 2030 day-to-day spending on hospitals, schools, and the rest would be completely paid for by taxes: in late October, the watchdog calculated it would barely be met, albeit only by a tiny margin.

Several days later, Reeves gave a press conference so extraordinary it forced morning television to interrupt its regular schedule. Weeks before the actual budget, the country was put on alert: taxes would rise, and the main reason being gloomy numbers from the OBR, in particular its conclusion that the UK had become less productive, putting more in but yielding less.

And so! It came to pass. Notwithstanding the implications from Telegraph editorials and Tory media appearances implied recently, this is essentially what happened during the budget, which was significant, harsh, and grim.

The Deceptive Justification

The way in which Reeves deceived us was her justification, since those OBR forecasts did not compel her actions. She might have made other choices; she might have given other reasons, including on budget day itself. Before the recent election, Starmer promised exactly such people power. "The hope of democracy. The strength of the vote. The possibility for national renewal."

A year on, yet it's a lack of agency that jumps out from Reeves's breakfast speech. Our first Labour chancellor in 15 years portrays herself as an apolitical figure buffeted by forces outside her influence: "Given the circumstances of the long-term challenges with our productivity … any finance minister of any party would be in this position today, facing the decisions that I face."

She certainly make decisions, only not the kind the Labour party cares to publicize. From April 2029 British workers and businesses will be paying another £26bn a year in taxes – but the majority of this will not go towards funding improved healthcare, new libraries, nor happier lives. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it isn't being lavished upon "benefits street".

Where the Cash Really Goes

Rather than being spent, over 50% of the extra cash will instead give Reeves a buffer for her self-imposed fiscal rules. About 25% is allocated to paying for the administration's policy reversals. Examining the watchdog's figures and being as generous as possible towards a Labour chancellor, a mere 17% of the tax take will fund actual new spending, for example abolishing the limit on child benefit. Removing it "costs" the Treasury a mere £2.5bn, because it was always an act of theatrical cruelty from George Osborne. A Labour government could and should abolished it immediately upon taking office.

The Real Target: The Bond Markets

Conservatives, Reform along with all of Blue Pravda have been barking about the idea that Reeves fits the caricature of Labour chancellors, taxing hard workers to spend on the workshy. Labour backbenchers have been cheering her budget for being a relief for their social concerns, safeguarding the most vulnerable. Both sides are 180-degrees wrong: Reeves's budget was primarily aimed at investment funds, speculative capital and the others in the financial markets.

The government can make a strong case in its defence. The forecasts from the OBR were insufficient for comfort, particularly given that bond investors demand from the UK the highest interest rate of all G7 rich countries – higher than France, which lost a prime minister, higher than Japan that carries far greater debt. Combined with our measures to cap fuel bills, prescription charges as well as train fares, Starmer together with Reeves argue this budget enables the Bank of England to cut its key lending rate.

You can see why those folk with red rosettes may choose not to frame it in such terms when they're on the doorstep. According to one independent adviser to Downing Street puts it, Reeves has "weaponised" financial markets as a tool of control against Labour MPs and the electorate. This is why the chancellor can't resign, regardless of which pledges 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.

A Lack of Statecraft , a Broken Promise

What is absent here is any sense of strategic governance, of harnessing the Treasury and the Bank to reach a fresh understanding with investors. Also absent is intuitive knowledge of voters,