🔗 Share this article

The accusation represents a grave matter: suggesting Rachel Reeves has deceived Britons, frightening them to accept massive additional taxes that could be used for higher welfare payments. However exaggerated, this isn't typical Westminster sparring; on this occasion, the stakes are more serious. A week ago, critics aimed at Reeves alongside Keir Starmer had been calling their budget "a shambles". Today, it's branded as lies, and Kemi Badenoch demanding the chancellor to quit.

Such a grave accusation demands clear responses, therefore here is my assessment. Has the chancellor tell lies? On the available information, no. There were no major untruths. But, notwithstanding Starmer's yesterday's comments, that doesn't mean there is no issue here and we should move on. The Chancellor did misinform the public about the considerations shaping her choices. Was this all to funnel cash to "benefits street", like the Tories assert? Certainly not, and the figures demonstrate it.

A Standing Takes Another Blow, But Facts Should Prevail

Reeves has sustained a further blow to her standing, however, if facts still have anything to do with politics, Badenoch ought to call off her lynch mob. Perhaps the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the leak of its own documents will quench SW1's thirst for blood.

Yet the real story is far stranger than the headlines indicate, and stretches wider and further beyond the careers of Starmer and the class of '24. Fundamentally, this is a story about what degree of influence the public have in the governance of the nation. This should should worry you.

First, to the Core Details

After the OBR published last Friday a portion of the forecasts it provided to Reeves while she prepared the red book, the surprise was immediate. Not merely had the OBR never done such a thing before (an "exceptional move"), its figures seemingly went against Reeves's statements. While rumors from Westminster suggested the grim nature of the budget would have to be, the OBR's own predictions were getting better.

Consider the Treasury's so-called "iron-clad" rule, that by 2030 day-to-day spending for hospitals, schools, and other services would be completely funded by taxes: at the end of October, the OBR calculated this would just about be met, albeit by a minuscule margin.

A few days later, Reeves held a press conference so extraordinary that it caused morning television to interrupt its usual fare. Several weeks before the real budget, the nation was warned: taxes would rise, and the main reason being pessimistic numbers from the OBR, specifically its conclusion that the UK was less efficient, investing more but getting less out.

And lo! It happened. Despite the implications from Telegraph editorials and Tory media appearances suggested recently, that is basically what transpired during the budget, that proved to be big and painful and bleak.

The Deceptive Justification

The way in which Reeves deceived us concerned her alibi, since those OBR forecasts did not compel her actions. She might have chosen different options; she might have given alternative explanations, including on budget day itself. Prior to last year's election, Starmer promised precisely this kind of public influence. "The promise of democracy. The strength of the vote. The potential 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 to be a technocrat buffeted by forces outside her influence: "In the context of the long-term challenges on our productivity … any chancellor of any political stripe would be in this position today, facing the choices that I face."

She certainly make a choice, only not one Labour wishes to publicize. Starting April 2029 UK workers as well as businesses will be contributing another £26bn annually in taxes – but most of that will not be spent on better hospitals, new libraries, nor happier lives. Whatever bilge comes from Nigel Farage, Badenoch and their allies, it is not being lavished upon "welfare claimants".

Where the Cash Really Goes

Rather than being spent, over 50% of this extra cash will in fact provide Reeves a buffer for her own budgetary constraints. About 25% is allocated to covering the administration's U-turns. Examining the watchdog's figures and being as generous as possible to a Labour chancellor, a mere 17% of the tax take will go on actual new spending, for example abolishing the two-child cap on child benefit. Removing it "will cost" the Treasury a mere £2.5bn, because it had long been a bit of theatrical cruelty from George Osborne. This administration should have abolished it in its first 100 days.

The Real Target: Financial Institutions

The Tories, Reform and the entire Blue Pravda have been railing against the idea that Reeves fits the stereotype of left-wing finance ministers, taxing strivers to spend on shirkers. Party MPs have been cheering her budget as balm for their troubled consciences, safeguarding the disadvantaged. Both sides are 180-degrees wrong: Reeves's budget was largely targeted towards investment funds, hedge funds and participants within the financial markets.

The government could present a compelling argument in its defence. The margins from the OBR were too small for comfort, particularly given that bond investors charge the UK the greatest borrowing cost among G7 rich countries – higher than France, which lost its leader, higher than Japan which has way more debt. Combined with our measures to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say this budget allows the central bank to reduce its key lending rate.

You can see why those wearing Labour badges may choose not to frame it in such terms next time they're on #Labourdoorstep. As a consultant for Downing Street says, Reeves has effectively "weaponised" financial markets as a tool of control against Labour MPs and the electorate. This is why Reeves can't resign, no matter what promises are broken. It is also the reason Labour MPs must fall into line and support measures that cut billions from social security, as Starmer promised yesterday.

Missing Statecraft , an Unfulfilled Pledge

What's missing from this is any sense of strategic governance, of harnessing the finance ministry and the central bank to reach a new accommodation with markets. Also absent is innate understanding of voters,