🔗 Share this article

The accusation represents a grave matter: that Rachel Reeves may have deceived the British public, spooking them into accepting billions in extra taxes which would be spent on higher benefits. However hyperbolic, this isn't usual Westminster bickering; on this occasion, the stakes are higher. Just last week, critics aimed at Reeves alongside Keir Starmer were calling their budget "a mess". Today, it is branded as lies, with Kemi Badenoch demanding Reeves to step down.

This grave accusation requires clear responses, so let me provide my view. Did the chancellor been dishonest? Based on the available evidence, apparently not. She told no major untruths. However, despite Starmer's yesterday's comments, that doesn't mean there's no issue here and we should move on. Reeves did misinform the public regarding the considerations informing her choices. Was it to channel cash to "benefits street", as the Tories assert? Certainly not, and the figures demonstrate this.

A Reputation Sustains Another Blow, Yet Truth Should Prevail

Reeves has taken another hit to her standing, however, if facts continue to have anything to do with politics, Badenoch ought to call off her lynch mob. Maybe the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the unauthorized release of its own documents will satisfy SW1's appetite for scandal.

But the real story is much more unusual compared to the headlines indicate, and stretches wider and further than the careers of Starmer and the 2024 intake. At its heart, this is an account about what degree of influence you and I have over the running of the nation. This should concern everyone.

Firstly, to the Core Details

After the OBR published recently a portion of the forecasts it provided to Reeves while she wrote the budget, the surprise was instant. Not merely had the OBR never done such a thing before (described as an "rare action"), its numbers apparently went against Reeves's statements. While rumors from Westminster were about how bleak the budget was going to be, the watchdog's forecasts were getting better.

Take the Treasury's most "unbreakable" rule, that by 2030 daily spending on hospitals, schools, and other services must be wholly funded by taxes: at the end of October, the watchdog calculated it would barely be met, albeit by a tiny margin.

A few days later, Reeves gave a media briefing so unprecedented that it caused breakfast TV to interrupt its regular schedule. Weeks prior to the actual budget, the nation was put on alert: taxes were going up, with the main reason cited as pessimistic numbers from the OBR, specifically its conclusion suggesting the UK was less efficient, investing more but getting less out.

And lo! It happened. Notwithstanding what Telegraph editorials combined with Tory broadcast rounds suggested over the weekend, that is essentially what transpired at the budget, which was significant, harsh, and grim.

The Deceptive Alibi

The way in which Reeves misled us concerned her alibi, because these OBR forecasts did not force her hand. She might have chosen other choices; she could have provided alternative explanations, including on budget day itself. Before last year's election, Starmer pledged exactly such people power. "The promise of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it's a lack of agency that is evident from Reeves's pre-budget speech. The first Labour chancellor for a decade and a half portrays herself as a technocrat at the mercy of factors beyond her control: "In the context of the long-term challenges on our productivity … any chancellor of any party would be standing here today, confronting the decisions that I face."

She certainly make a choice, only not the kind Labour cares to publicize. From April 2029 UK workers as well as businesses are set to be paying an additional £26bn annually in taxes – but most of that will not go towards spent on improved healthcare, public services, nor enhanced wellbeing. Whatever bilge is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "welfare claimants".

Where the Cash Really Goes

Rather than being spent, more than 50% of this additional revenue will instead provide Reeves a buffer against her own budgetary constraints. About 25% goes on paying for the administration's policy reversals. Examining the OBR's calculations and being as generous as possible towards a Labour chancellor, only 17% of the taxes will fund genuinely additional spending, such as abolishing the two-child cap on child benefit. Removing it "costs" the Treasury only £2.5bn, as it was always a bit of theatrical cruelty from George Osborne. A Labour government should have have binned it in its first 100 days.

The Real Target: The Bond Markets

Conservatives, Reform along with all of Blue Pravda have spent days barking about how Reeves fits the caricature of left-wing finance ministers, taxing hard workers to fund shirkers. Party MPs are applauding her budget as balm for their social concerns, safeguarding the disadvantaged. Both sides could be completely mistaken: Reeves's budget was primarily targeted towards investment funds, speculative capital and the others in the financial markets.

The government can make a compelling argument in its defence. The forecasts provided by the OBR were deemed too small for comfort, particularly given that bond investors charge the UK the highest interest rate of all G7 developed nations – exceeding that of France, that recently lost a prime minister, and exceeding Japan that carries far greater debt. Coupled with our policies to cap fuel bills, prescription charges as well as train fares, Starmer together with Reeves can say this budget allows the central bank to cut its key lending rate.

You can see why those wearing red rosettes might not frame it in such terms when they visit #Labourdoorstep. According to one independent adviser for Downing Street says, Reeves has effectively "weaponised" financial markets to act as a tool of discipline over her own party and the electorate. It's why the chancellor cannot resign, no matter what pledges are broken. It's the reason Labour MPs will have to knuckle down and support measures that cut billions from social security, as Starmer indicated yesterday.

A Lack of Political Vision and an Unfulfilled Promise

What's missing here is the notion of strategic governance, of mobilising the Treasury and the central bank to forge a fresh understanding with investors. Missing too is intuitive knowledge of voters,