🔗 Share this article

This accusation is a serious one: that Rachel Reeves may have misled the British public, spooking them into accepting billions in additional taxes that could be used for higher welfare payments. However exaggerated, this is not usual Westminster bickering; on this occasion, the stakes are higher. Just last week, critics aimed at Reeves and Keir Starmer had been calling their budget "a mess". Now, it is denounced as falsehoods, and Kemi Badenoch calling for Reeves to step down.

Such a grave charge demands straightforward answers, so here is my assessment. Has the chancellor lied? Based on current evidence, apparently not. She told no whoppers. But, notwithstanding Starmer's yesterday's comments, it doesn't follow that there is no issue here and we should move on. The Chancellor did misinform the public regarding the considerations shaping her decisions. Was it to funnel cash towards "welfare recipients", as the Tories claim? Certainly not, and the figures prove it.

A Reputation Takes A Further Blow, But Facts Should Prevail

The Chancellor has taken another blow to her standing, but, should facts still matter in politics, Badenoch ought to stand down her attack dogs. Maybe the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will quench SW1's appetite for scandal.

But the real story is far stranger than the headlines indicate, and stretches wider and further beyond the careers of Starmer and his 2024 intake. At its heart, this is an account about how much say you and I have over the running of our own country. And it concern you.

First, on to the Core Details

After the OBR released last Friday some of the forecasts it shared with Reeves as she prepared the budget, the shock was immediate. Not merely had the OBR never acted this way before (described as an "rare action"), its numbers apparently went against the chancellor's words. While leaks from Westminster were about how bleak the budget would have to be, the watchdog's predictions were improving.

Take the Treasury's so-called "unbreakable" rule, stating by 2030 day-to-day spending on hospitals, schools, and other services would be wholly funded by taxes: at the end of October, the OBR calculated it would just about be met, albeit only by a minuscule margin.

Several days later, Reeves held a media briefing so extraordinary it forced morning television to break from its regular schedule. Weeks prior to the real budget, the nation was put on alert: taxes would rise, and the primary cause being pessimistic numbers provided by the OBR, specifically its finding that the UK was less productive, investing more but yielding less.

And lo! It happened. Despite what Telegraph editorials combined with Tory media appearances implied over the weekend, that is basically what transpired at the budget, that proved to be big and painful and bleak.

The Deceptive Justification

The way in which Reeves misled us was her justification, because these OBR forecasts didn't force her hand. She might have made different options; she might have provided alternative explanations, including during the statement. Prior to the recent election, Starmer pledged 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's powerlessness that is evident in Reeves's breakfast speech. The first Labour chancellor in 15 years portrays herself as a technocrat buffeted by forces outside her influence: "In the context of the long-term challenges with our productivity … any finance minister of any party would be standing here today, confronting the choices that I face."

She did make a choice, only not the kind the Labour party cares to broadcast. From April 2029 British workers and businesses are set to be contributing an additional £26bn annually in tax – and most of that will not go towards spent on better hospitals, public services, nor happier lives. Whatever bilge is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "welfare claimants".

Where the Cash Actually Ends Up

Instead of being spent, more than 50% of the additional revenue will instead give Reeves cushion for her self-imposed fiscal rules. Approximately 25% is allocated to covering the government's own policy reversals. Examining the OBR's calculations and giving maximum benefit of the doubt towards Reeves, only 17% of the tax take will go on genuinely additional spending, for example abolishing the two-child cap on child benefit. Removing it "will cost" the Treasury only £2.5bn, as it was always a bit of theatrical cruelty by George Osborne. A Labour government should have have binned it immediately upon taking office.

The True Audience: The Bond Markets

Conservatives, Reform and the entire right-wing media have spent days railing against how Reeves conforms to the stereotype of left-wing finance ministers, soaking hard workers to fund the workshy. Party MPs are cheering her budget for being a relief to their troubled consciences, protecting the most vulnerable. Each group are 180-degrees wrong: Reeves's budget was largely aimed at investment funds, speculative capital and the others in the bond markets.

Downing Street can make a compelling argument for itself. The margins from the OBR were insufficient to feel secure, particularly considering bond investors demand from the UK the highest interest rate of all G7 rich countries – higher than France, that recently lost its leader, and exceeding Japan that carries way more debt. Coupled with our policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves can say their plan enables the Bank of England to cut its key lending rate.

You can see that those wearing red rosettes may choose not to couch it in such terms when they visit #Labourdoorstep. According to a consultant for Downing Street puts it, Reeves has effectively "weaponised" financial markets as a tool of discipline against Labour MPs and the electorate. This is why the chancellor cannot resign, no matter what pledges are broken. It's why Labour MPs will have to fall into line and support measures to take billions off social security, as Starmer promised recently.

Missing Statecraft , a Broken Promise

What's missing here is any sense of strategic governance, of mobilising the finance ministry and the central bank to reach a fresh understanding with markets. Missing too is any innate understanding of voters,