🔗 Share this article

The charge represents a grave matter: suggesting Rachel Reeves has misled the British public, spooking them into accepting massive additional taxes which could be funneled into increased welfare payments. However exaggerated, this isn't usual Westminster bickering; this time, the stakes could be damaging. Just last week, detractors aimed at Reeves alongside Keir Starmer were labeling their budget "chaotic". Now, it's branded as lies, with Kemi Badenoch demanding the chancellor's resignation.

Such a grave accusation demands straightforward answers, therefore here is my view. Has the chancellor tell lies? On the available information, apparently not. There were no major untruths. However, despite Starmer's recent remarks, that doesn't mean there's no issue here and we can all move along. The Chancellor did misinform the public regarding the considerations shaping her decisions. Was it to funnel cash to "benefits street", as the Tories claim? No, as the numbers prove it.

A Reputation Takes Another Hit, Yet Truth Must Prevail

The Chancellor has taken another hit to her standing, but, if facts still have anything to do with politics, Badenoch ought to stand down her lynch mob. Perhaps the resignation 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 compared to the headlines indicate, and stretches broader and deeper beyond the careers of Starmer and his class of '24. At its heart, this is a story about how much say the public get over the governance of the nation. And it should worry everyone.

Firstly, to the Core Details

After the OBR published last Friday a portion of the forecasts it provided to Reeves as she wrote the budget, the shock was instant. Not merely has the OBR not done such a thing before (described as an "rare action"), its figures seemingly contradicted the chancellor's words. Even as rumors from Westminster were about how bleak the budget was going to be, the OBR's own predictions were getting better.

Consider the government's so-called "unbreakable" rule, that by 2030 daily spending for hospitals, schools, and other services would be completely paid for by taxes: at the end of October, the OBR calculated it would just about be met, albeit only by a tiny margin.

Several days later, Reeves held a media briefing so extraordinary that it caused breakfast TV to interrupt its regular schedule. Several weeks before the real budget, the country was warned: taxes were going up, with the main reason cited as pessimistic numbers provided by the OBR, specifically its conclusion suggesting the UK had become less productive, putting more in but getting less out.

And lo! It happened. Notwithstanding the implications from Telegraph editorials and Tory broadcast rounds suggested over the weekend, this is basically what transpired during the budget, which was significant, harsh, and grim.

The Misleading Justification

Where Reeves deceived us was her justification, because those OBR forecasts didn't force her hand. She might have chosen different options; she might have given alternative explanations, including on budget day itself. Prior to the recent election, Starmer promised exactly such public influence. "The promise of democracy. The strength of the vote. The potential for national renewal."

One year later, yet it is powerlessness that is evident from Reeves's breakfast speech. Our first Labour chancellor in 15 years casts herself to be a technocrat buffeted by factors outside her influence: "In the context of the persistent challenges on our productivity … any finance minister of any party would be in this position today, facing the choices that I face."

She certainly make decisions, only not one Labour wishes to broadcast. Starting April 2029 UK workers and businesses will be contributing another £26bn a year in tax – and the majority of this will not go towards spent on better hospitals, public services, nor enhanced wellbeing. Whatever bilge is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "benefits street".

Where the Cash Really Goes

Rather than being spent, over 50% of the extra cash will in fact give Reeves cushion against her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the government's own policy reversals. Examining the watchdog's figures and giving maximum benefit of the doubt to Reeves, a mere 17% of the taxes will go on genuinely additional spending, such as abolishing the two-child cap on child benefit. Its abolition "will cost" the Treasury a mere £2.5bn, as it had long been an act of theatrical cruelty by George Osborne. A Labour government could and should have binned it immediately upon taking office.

The Real Target: The Bond Markets

The Tories, Reform and the entire right-wing media have been barking about how Reeves fits the stereotype of Labour chancellors, soaking hard workers to spend on shirkers. Party MPs have been cheering her budget as balm to their troubled consciences, safeguarding the most vulnerable. Each group are 180-degrees wrong: The Chancellor's budget was largely aimed at asset managers, speculative capital and the others in the bond markets.

The government can make a strong case for itself. The margins from the OBR were insufficient for comfort, especially considering lenders demand from the UK the highest interest rate among G7 developed nations – exceeding that of France, which lost its leader, higher than Japan which has far greater debt. Coupled with our policies to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves can say this budget allows the central bank to cut interest rates.

You can see that those folk with Labour badges might not frame it in such terms next time they're on the doorstep. As one independent adviser for Downing Street says, Reeves has effectively "utilised" financial markets to act as an instrument of control against Labour MPs and the voters. It's why the chancellor can't resign, no matter what promises she breaks. It is also why Labour MPs will have to knuckle down and support measures to take billions off social security, as Starmer promised yesterday.

A Lack of Statecraft and a Broken Promise

What's missing from this is any sense of strategic governance, of mobilising the Treasury and the Bank to reach a new accommodation with investors. Missing too is innate understanding of voters,