🔗 Share this article

The charge represents a grave matter: suggesting Rachel Reeves has misled Britons, spooking them to accept billions in extra taxes that would be used for higher benefits. While exaggerated, this isn't usual political sparring; this time, the stakes are higher. A week ago, critics aimed at Reeves and Keir Starmer had been calling their budget "uncoordinated". Now, it is branded as lies, and Kemi Badenoch calling for Reeves to step down.

This grave accusation demands straightforward responses, so let me provide my assessment. Did the chancellor been dishonest? On current information, apparently not. There were no blatant falsehoods. But, notwithstanding Starmer's yesterday's comments, that doesn't mean there is nothing to see and we should move on. The Chancellor did misinform the public regarding the considerations informing her choices. Was this all to channel cash to "welfare recipients", like the Tories claim? No, and the numbers prove it.

A Standing Takes Another Hit, Yet Truth Should Prevail

Reeves has sustained another hit to her reputation, however, should facts continue to have anything to do with politics, Badenoch should call off her lynch mob. Maybe the stepping down recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will quench SW1's thirst for blood.

But the true narrative is much more unusual than the headlines indicate, extending broader and deeper beyond the political futures of Starmer and his class of '24. Fundamentally, this is a story about what degree of influence you and I have in the governance of the nation. This should should worry everyone.

First, on to Brass Tacks

After the OBR published last Friday some of the projections it shared with Reeves as she wrote the red book, the shock was immediate. Not merely has the OBR not done such a thing before (an "rare action"), its figures seemingly went against Reeves's statements. Even as rumors from Westminster suggested how bleak the budget would have to be, the OBR's own forecasts were getting better.

Take the government's so-called "unbreakable" fiscal rule, that by 2030 daily spending for hospitals, schools, and the rest would be wholly paid for by taxes: in late October, the OBR calculated it would just about be met, albeit only by a tiny margin.

Several days later, Reeves held a press conference so extraordinary that it caused breakfast TV to interrupt its regular schedule. Several weeks prior to the actual budget, the country was warned: taxes were going up, and the primary cause being gloomy numbers from the OBR, specifically its conclusion that the UK had become less efficient, investing more but getting less out.

And so! It came to pass. Notwithstanding what Telegraph editorials and Tory broadcast rounds implied recently, that is essentially what transpired at the budget, which was big and painful and bleak.

The Deceptive Alibi

The way in which Reeves deceived us concerned her justification, because those OBR forecasts didn't compel her actions. She might have made different options; she could have given other reasons, even during the statement. Prior to last year's election, Starmer pledged precisely this kind of public influence. "The promise of democracy. The power of the vote. The possibility for national renewal."

One year later, and it is a lack of agency that is evident from Reeves's breakfast speech. The first Labour chancellor for a decade and a half portrays herself as a technocrat at the mercy of forces beyond her control: "In the context of the persistent challenges with our productivity … any finance minister of any party would be in this position today, facing the decisions that I face."

She did make a choice, just not one Labour wishes to broadcast. From April 2029 British workers and businesses are set to be contributing an additional £26bn annually in tax – but the majority of this will not be funding better hospitals, public services, or enhanced wellbeing. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and their allies, it isn't being lavished upon "benefits street".

Where the Cash Actually Ends Up

Rather than being spent, over 50% of the extra cash will instead provide Reeves a buffer against her own fiscal rules. Approximately 25% goes on covering the government's own U-turns. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards Reeves, only 17% of the tax take will fund genuinely additional spending, such as abolishing the limit on child benefit. Its abolition "will cost" the Treasury a mere £2.5bn, as it was always a bit of political theatre by George Osborne. This administration could and should have binned it immediately upon taking office.

The Real Target: Financial Institutions

Conservatives, Reform and all of right-wing media have spent days railing against how Reeves fits the stereotype of left-wing finance ministers, soaking hard workers to fund the workshy. Party MPs have been cheering her budget as a relief for their social concerns, protecting the disadvantaged. Both sides could be 180-degrees wrong: The Chancellor's budget was largely targeted towards asset managers, hedge funds and the others in the financial markets.

The government could present a compelling argument in its defence. The forecasts provided by the OBR were insufficient to feel secure, particularly considering lenders charge the UK the highest interest rate among G7 developed nations – higher than France, which lost a prime minister, higher than Japan which has far greater debt. Coupled with the policies to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves argue their plan allows the Bank of England to reduce its key lending rate.

You can see why those wearing red rosettes might not couch it in such terms next time they're on #Labourdoorstep. According to one independent adviser for Downing Street puts it, Reeves has "utilised" the bond market to act as an instrument of discipline over her own party and the voters. This is why the chancellor can't resign, no matter what pledges are broken. It is also why Labour MPs must fall into line and vote to take billions off social security, just as Starmer indicated yesterday.

A Lack of Statecraft and an Unfulfilled Pledge

What's missing here is the notion of statecraft, of harnessing the finance ministry and the Bank to forge a new accommodation with markets. Also absent is innate understanding of voters,