🔗 Share this article

The accusation is a serious one: that Rachel Reeves has lied to the British public, spooking them to accept billions in extra taxes that would be used for increased welfare payments. However exaggerated, this isn't typical political sparring; this time, the consequences are more serious. A week ago, critics aimed at Reeves and Keir Starmer were calling their budget "chaotic". Today, it's denounced as falsehoods, with Kemi Badenoch calling for the chancellor to quit.

This grave charge demands clear responses, therefore let me provide my view. Did the chancellor been dishonest? Based on the available evidence, no. She told no whoppers. However, notwithstanding Starmer's yesterday's remarks, it doesn't follow that there is no issue here and we should move on. Reeves did misinform the public regarding the considerations informing her decisions. Was it to funnel cash to "benefits street", as the Tories assert? Certainly not, and the figures demonstrate it.

A Standing Sustains A Further Blow, Yet Truth Should Win Out

Reeves has taken a further hit to her reputation, but, if facts still matter in politics, Badenoch should stand down her lynch mob. Perhaps the stepping down yesterday of OBR head, Richard Hughes, due to the leak of its own documents will satisfy SW1's thirst for blood.

Yet the real story is much more unusual compared to the headlines indicate, extending broader and deeper beyond the political futures of Starmer and his class of '24. Fundamentally, herein lies an account about how much say you and I get over the governance of the nation. This should concern you.

First, to the Core Details

After the OBR released last Friday some of the projections it shared with Reeves while she prepared the red book, the shock was immediate. Not only has the OBR not acted this way before (an "unusual step"), its numbers apparently went against the chancellor's words. While rumors from Westminster suggested the grim nature of the budget would have to be, the watchdog's predictions were getting better.

Take the government's so-called "iron-clad" rule, that by 2030 daily spending on hospitals, schools, and the rest must be completely funded by taxes: in late October, the watchdog reckoned this would barely be met, albeit only by a minuscule margin.

A few days later, Reeves gave a media briefing so extraordinary that it caused breakfast TV to interrupt its usual fare. Weeks before the real budget, the country was put on alert: taxes were going up, with the primary cause cited as pessimistic numbers from the OBR, specifically its conclusion that the UK was less productive, putting more in but getting less out.

And so! 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 big and painful and bleak.

The Misleading Alibi

Where Reeves deceived us was her alibi, because these OBR forecasts didn't compel her actions. She might have made different options; she might have given alternative explanations, even on budget day itself. Prior to the recent election, Starmer pledged precisely this kind of public influence. "The hope of democracy. The strength of the vote. The possibility for national renewal."

One year later, and it is a lack of agency that is evident from Reeves's pre-budget speech. The first Labour chancellor for a decade and a half casts herself as an apolitical figure at the mercy of factors outside her influence: "Given the circumstances of the persistent challenges with our productivity … any finance minister of any political stripe would be standing here today, confronting the decisions that I face."

She certainly make a choice, only not the kind Labour cares to publicize. Starting April 2029 UK workers and businesses will be contributing another £26bn a year in tax – but the majority of this will not go towards funding better hospitals, public services, nor happier lives. Whatever bilge is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "benefits street".

Where the Money Really Goes

Rather than being spent, more than 50% of this additional revenue will instead provide Reeves cushion for her own fiscal rules. About 25% goes on covering the administration's policy reversals. Examining the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, a mere 17% of the taxes will go on actual new spending, for example abolishing the two-child cap on child benefit. Removing it "costs" the Treasury a mere £2.5bn, because it was always a bit of theatrical cruelty from George Osborne. A Labour government should have abolished it immediately upon taking office.

The Real Target: Financial Institutions

The Tories, Reform along with the entire Blue Pravda have been railing against how Reeves conforms to the caricature of Labour chancellors, taxing strivers to spend on the workshy. Labour backbenchers are applauding her budget as balm to their troubled consciences, protecting the disadvantaged. Both sides are 180-degrees wrong: Reeves's budget was largely targeted towards asset managers, speculative capital and the others in the financial markets.

Downing Street can make a compelling argument for itself. The forecasts from the OBR were deemed too small for comfort, particularly considering bond investors charge the UK the highest interest rate of all G7 rich countries – exceeding that of France, which lost its leader, and exceeding Japan that carries far greater debt. Coupled with our policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget enables the central bank to reduce interest rates.

You can see that those folk with Labour badges may choose not to couch it in such terms when they visit #Labourdoorstep. As a consultant for Downing Street says, Reeves has "weaponised" the bond market as an instrument of control over Labour MPs and the voters. This is why Reeves cannot resign, no matter what pledges she breaks. It is also the reason Labour MPs must knuckle down and support measures that cut billions from social security, just as Starmer indicated recently.

A Lack of Statecraft and a Broken Promise

What is absent from this is the notion of statecraft, of mobilising the finance ministry and the Bank to forge a new accommodation with markets. Missing too is any intuitive knowledge of voters,