🔗 Share this article

The accusation carries significant weight: suggesting Rachel Reeves may have misled Britons, spooking them to accept billions in extra taxes which could be funneled into increased welfare payments. While hyperbolic, this isn't usual political bickering; on this occasion, the consequences are higher. A week ago, critics of Reeves alongside Keir Starmer were labeling their budget "a mess". Today, it's denounced as falsehoods, with Kemi Badenoch demanding the chancellor's resignation.

Such a serious charge requires straightforward responses, so let me provide my view. Has the chancellor been dishonest? On current information, apparently not. There were no major untruths. However, despite Starmer's recent comments, it doesn't follow that there's no issue here and we should move on. Reeves did mislead the public about the considerations informing her decisions. Was this all to channel cash towards "welfare recipients", as the Tories assert? Certainly not, as the numbers demonstrate this.

A Reputation Takes Another Hit, But Facts Should Prevail

Reeves has sustained a further hit to her standing, however, should facts still have anything to do with politics, Badenoch should stand down her attack dogs. Maybe the resignation recently of OBR head, Richard Hughes, over the unauthorized release of its internal documents will satisfy SW1's appetite for scandal.

Yet the real story is far stranger than the headlines suggest, extending wider and further than the careers of Starmer and his 2024 intake. At its heart, herein lies an account concerning how much say the public get over the governance of the nation. And it should worry everyone.

Firstly, on to Brass Tacks

After the OBR published last Friday some of the forecasts it shared with Reeves as she wrote the red book, the shock was immediate. Not only has the OBR not acted this way before (described as an "unusual step"), its figures seemingly went against the chancellor's words. While rumors from Westminster were about how bleak the budget would have to be, the watchdog's predictions were improving.

Take the government's so-called "unbreakable" fiscal rule, stating by 2030 day-to-day spending on hospitals, schools, and other services must be wholly paid for by taxes: at the end of October, the watchdog reckoned this would barely be met, albeit by a tiny margin.

Several days later, Reeves held a media briefing so extraordinary that it caused breakfast TV 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, in particular its conclusion suggesting the UK was less productive, putting more in but yielding less.

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

The Misleading Alibi

The way in which Reeves deceived us was her alibi, since these OBR forecasts didn't force her hand. She might have made different options; she could have provided alternative explanations, even during the statement. Prior to last year's election, Starmer pledged exactly such people power. "The promise of democracy. The power of the vote. The potential for national renewal."

One year later, and it's powerlessness that is evident from Reeves's breakfast speech. The first Labour chancellor for a decade and a half casts herself to be an apolitical figure buffeted by forces outside her influence: "In the context of the persistent challenges with our productivity … any finance minister of any party would be in this position today, confronting the choices that I face."

She certainly make a choice, only not one Labour cares to broadcast. Starting April 2029 UK workers as well as businesses will be paying an additional £26bn a year in tax – but the majority of this will not be spent on better hospitals, public services, or happier lives. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and their allies, it is not getting splashed on "benefits street".

Where the Money Actually Ends Up

Instead of being spent, over 50% of the extra cash will instead provide Reeves a buffer for her own budgetary constraints. Approximately 25% goes on covering the administration's policy reversals. Examining the watchdog's figures and being as generous as possible towards Reeves, only 17% of the tax take will fund genuinely additional spending, for example abolishing the two-child cap on child benefit. Its abolition "will cost" the Treasury only £2.5bn, as it had long been an act of theatrical cruelty from George Osborne. A Labour government could and should abolished it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform and all of Blue Pravda have been barking about the idea that Reeves fits the stereotype of left-wing finance ministers, soaking hard workers to spend on the workshy. Labour backbenchers have been applauding her budget for being a relief to their social concerns, protecting the disadvantaged. Both sides could be 180-degrees wrong: Reeves's budget was largely targeted towards asset managers, speculative capital and the others in the financial markets.

Downing Street could present a strong case for itself. The forecasts from the OBR were too small for comfort, particularly given that lenders charge the UK the greatest borrowing cost among G7 rich countries – higher than France, that recently lost its leader, higher than Japan which has way more debt. Combined with our measures to hold down fuel bills, prescription charges as well as train fares, Starmer together with Reeves argue this budget enables the Bank of England to reduce its key lending rate.

You can see why those folk with red rosettes might not frame it this way next time they visit #Labourdoorstep. According to one independent adviser to Downing Street says, Reeves has "utilised" financial markets to act as an instrument of discipline against her own party and the voters. It's why the chancellor can't resign, regardless of which promises are broken. It's the reason Labour MPs must fall into line and support measures that cut billions from social security, just as Starmer indicated recently.

Missing Political Vision , a Broken Promise

What's missing here is the notion of statecraft, of harnessing the Treasury and the central bank to reach a new accommodation with markets. Also absent is any intuitive knowledge of voters,