🔗 Share this article

The charge carries significant weight: that Rachel Reeves has lied to UK citizens, spooking them to accept massive extra taxes that could be spent on higher welfare payments. While exaggerated, this is not usual Westminster sparring; on this occasion, the stakes could be damaging. A week ago, detractors of Reeves alongside Keir Starmer had been labeling their budget "a shambles". Today, it's branded as lies, with Kemi Badenoch demanding the chancellor's resignation.

Such a serious accusation demands clear responses, so let me provide my view. Has the chancellor been dishonest? On the available information, apparently not. She told no blatant falsehoods. But, despite Starmer's yesterday's remarks, it doesn't follow that there's nothing to see and we can all move along. The Chancellor did misinform the public about the factors informing her decisions. Was it to funnel cash towards "welfare recipients", like the Tories assert? Certainly not, and the figures prove it.

A Reputation Sustains A Further Hit, But Facts Must Win Out

The Chancellor has taken another blow to her standing, but, should facts still have anything to do with politics, Badenoch should call off her lynch mob. Perhaps the resignation yesterday of OBR head, Richard Hughes, over the unauthorized release of its own documents will satisfy Westminster's appetite for scandal.

Yet the real story is much more unusual compared to the headlines indicate, extending wider and further beyond the political futures of Starmer and the 2024 intake. Fundamentally, this is a story concerning how much say the public have in the running of the nation. And it should worry everyone.

Firstly, to the Core Details

After the OBR published last Friday a portion of the forecasts it shared with Reeves while she wrote the red book, the shock was immediate. Not merely has the OBR never done such a thing before (an "rare action"), its numbers apparently contradicted the chancellor's words. While leaks from Westminster were about how bleak the budget would have to be, the watchdog's predictions were getting better.

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

Several days later, Reeves gave a media briefing so extraordinary it forced breakfast TV to interrupt its usual fare. Several weeks prior to the real budget, the nation was warned: taxes were going up, with the main reason cited as pessimistic numbers provided by the OBR, specifically its conclusion that the UK had become less productive, investing more but getting less out.

And lo! It came to pass. Notwithstanding what Telegraph editorials and Tory media appearances implied over the weekend, this is basically what transpired during the budget, which was big and painful and bleak.

The Misleading Alibi

Where Reeves misled us concerned her justification, since these OBR forecasts didn't compel her actions. She could have made different options; she could have given alternative explanations, including on budget day itself. Prior to the recent election, Starmer promised exactly such people power. "The hope of democracy. The power of the vote. The potential for national renewal."

One year later, yet it is powerlessness that jumps out from Reeves's pre-budget speech. The first Labour chancellor in 15 years casts herself as a technocrat buffeted by factors outside her influence: "Given the circumstances 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 decisions, only not one Labour wishes to broadcast. From April 2029 British workers and businesses will be contributing an additional £26bn annually in taxes – but the majority of this will not be funding better hospitals, public services, nor enhanced wellbeing. Regardless of what bilge is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "benefits street".

Where the Cash Really Goes

Instead of going on services, more than 50% of the additional revenue will in fact give Reeves a buffer for her own fiscal rules. Approximately 25% goes on covering the government's own policy reversals. Reviewing the watchdog's figures and being as generous as possible towards Reeves, only 17% of the taxes will go on genuinely additional spending, for example abolishing the limit on child benefit. Its abolition "will cost" the Treasury only £2.5bn, because it had long been a bit of political theatre from George Osborne. This administration should have have binned it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform along with all of right-wing media have been barking about the idea that Reeves conforms to the stereotype of left-wing finance ministers, taxing strivers to spend on shirkers. Labour backbenchers have been applauding her budget as balm to their social concerns, protecting the disadvantaged. Both sides could be 180-degrees wrong: The Chancellor's budget was primarily aimed at asset managers, speculative capital and participants within the financial markets.

Downing Street could present a strong case for itself. The margins from the OBR were deemed insufficient for comfort, especially given that lenders demand from the UK the highest interest rate among G7 rich countries – higher than France, which lost its leader, and exceeding Japan that carries far greater debt. Coupled with the policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves can say their plan enables the central bank to reduce its key lending rate.

It's understandable why those folk with red rosettes might not couch it in such terms next time they visit the doorstep. As one independent adviser to Downing Street says, Reeves has "utilised" financial markets as an instrument of discipline over her own party and the voters. This is why the chancellor cannot resign, regardless of which pledges are broken. It's the reason Labour MPs will have to knuckle down and vote that cut billions from social security, just as Starmer promised recently.

Missing Political Vision and a Broken Promise

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