🔗 Share this article

The charge carries significant weight: suggesting Rachel Reeves has deceived the British public, frightening them into accepting billions in additional taxes that would be funneled into increased benefits. While hyperbolic, this isn't typical political sparring; on this occasion, the consequences could be damaging. A week ago, detractors of Reeves alongside Keir Starmer were labeling their budget "a mess". Today, it is branded as falsehoods, and Kemi Badenoch calling for Reeves to step down.

Such a grave accusation demands clear responses, so let me provide my view. Has the chancellor been dishonest? Based on the available evidence, no. She told no blatant falsehoods. But, notwithstanding Starmer's recent comments, that doesn't mean there's nothing to see and we can all move along. Reeves did misinform the public about the factors informing her decisions. Was this all to funnel cash towards "benefits street", like the Tories claim? No, as the figures demonstrate this.

A Standing Takes A Further Blow, But Facts Must Win Out

The Chancellor has sustained a further hit to her standing, but, if facts still matter in politics, Badenoch should call off her attack dogs. Perhaps the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the leak of its own documents will satisfy Westminster's thirst for blood.

But the true narrative is much more unusual than the headlines indicate, extending wider and further beyond the careers of Starmer and his 2024 intake. At its heart, this is a story about how much say the public get over the running of the nation. This should should worry you.

First, on to Brass Tacks

When the OBR released last Friday some of the forecasts it provided to Reeves as she prepared the red book, the surprise was immediate. Not only had the OBR never acted this way before (an "exceptional move"), its figures apparently went against Reeves's statements. Even as leaks from Westminster suggested how bleak the budget was going to be, the OBR's own predictions were improving.

Consider the government's so-called "iron-clad" fiscal rule, that by 2030 day-to-day spending for hospitals, schools, and the rest would be completely funded by taxes: at the end of October, the OBR reckoned this would just about be met, albeit only by a tiny margin.

Several days later, Reeves held a press conference so extraordinary that it caused morning television to interrupt its regular schedule. Several weeks before the real budget, the country was warned: taxes were going up, and the main reason being gloomy numbers from the OBR, in particular its finding that the UK was less productive, investing more but getting less out.

And lo! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory broadcast rounds implied recently, that is basically what transpired during the budget, which was significant, harsh, and grim.

The Misleading Alibi

The way in which Reeves deceived us was her justification, since these OBR forecasts did not force her hand. She could have made different options; she could have provided other reasons, even on budget day itself. Before the recent election, Starmer pledged precisely this kind of public influence. "The hope of democracy. The power of the vote. The potential for national renewal."

A year on, yet it's powerlessness that jumps out in Reeves's pre-budget speech. The first Labour chancellor for a decade and a half portrays herself to be a technocrat buffeted by factors outside her influence: "In the context of the long-term challenges with our productivity … any chancellor of any political stripe would be in this position today, facing the decisions that I face."

She certainly make decisions, only not one the Labour party wishes to broadcast. Starting April 2029 British workers as well as businesses will be contributing an additional £26bn a year in taxes – and most of that will not go towards spent on better hospitals, public services, nor enhanced wellbeing. Regardless of what bilge comes from Nigel Farage, Badenoch and their allies, it is not being lavished upon "welfare claimants".

Where the Money Really Goes

Rather than being spent, over 50% of this extra cash will in fact provide Reeves cushion for her own fiscal rules. Approximately 25% is allocated to covering the administration's policy reversals. Examining the OBR's calculations and being as generous as possible to Reeves, only 17% of the taxes will fund genuinely additional spending, for example scrapping the limit on child benefit. Its abolition "will cost" the Treasury only £2.5bn, as it was always a bit of theatrical cruelty by George Osborne. This administration should have abolished it immediately upon taking office.

The True Audience: The Bond Markets

The Tories, Reform and the entire right-wing media have been barking about the idea that Reeves conforms to the caricature of Labour chancellors, soaking hard workers to fund shirkers. Party MPs have been cheering her budget as a relief to their social concerns, safeguarding the disadvantaged. Both sides could be 180-degrees wrong: The Chancellor's budget was largely aimed at asset managers, hedge funds and participants within the bond markets.

Downing Street can make a strong case for itself. The margins from the OBR were insufficient to feel secure, particularly given that lenders demand from the UK the greatest borrowing cost among G7 developed nations – exceeding that of France, which lost its leader, higher than Japan that carries way more debt. Combined with the policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves can say this budget enables the central bank to cut its key lending rate.

You can see that those folk with Labour badges might not couch it this way when they visit #Labourdoorstep. According to one independent adviser to Downing Street says, Reeves has effectively "utilised" financial markets as an instrument of discipline against Labour MPs and the electorate. This is why Reeves can't resign, no matter what pledges are broken. It is also why Labour MPs will have to knuckle down and support measures to take billions off social security, as Starmer promised recently.

A Lack of Statecraft and an Unfulfilled Pledge

What's missing here is the notion of strategic governance, of mobilising the finance ministry and the Bank to reach a fresh understanding with markets. Also absent is intuitive knowledge of voters,