🔗 Share this article

The accusation represents a grave matter: that Rachel Reeves may have misled UK citizens, scaring them to accept massive additional taxes that would be funneled into higher welfare payments. However hyperbolic, this is not typical Westminster bickering; on this occasion, the stakes could be damaging. A week ago, detractors aimed at Reeves alongside Keir Starmer were calling their budget "a mess". Today, it is denounced as lies, with Kemi Badenoch calling for the chancellor to quit.

This grave accusation requires straightforward responses, therefore let me provide my view. Has the chancellor lied? On current evidence, apparently not. There were no major untruths. However, despite Starmer's yesterday's remarks, that doesn't mean there is nothing to see and we should move on. The Chancellor did misinform the public regarding the factors informing her decisions. Was this all to channel cash to "benefits street", as the Tories claim? No, as the numbers prove it.

A Reputation Sustains Another Blow, But Facts Must Prevail

The Chancellor has taken a further hit to her reputation, however, if facts continue to matter in politics, Badenoch should call off her lynch mob. Maybe the stepping down yesterday of OBR head, Richard Hughes, over the leak of its own documents will quench Westminster's thirst for blood.

Yet the real story is much more unusual than the headlines suggest, extending wider and further beyond the careers of Starmer and his class of '24. At its heart, this is a story concerning what degree of influence the public get in the governance of the nation. And it should worry everyone.

First, to the Core Details

After the OBR released recently some of the forecasts it shared with Reeves while she prepared the budget, the surprise was instant. Not only has the OBR not done such a thing before (an "exceptional move"), its numbers apparently contradicted the chancellor's words. While leaks from Westminster suggested the grim nature of the budget was going to be, the watchdog's forecasts were improving.

Take the government's most "unbreakable" rule, that by 2030 daily spending for hospitals, schools, and other services must be wholly funded by taxes: at the end of October, the watchdog reckoned it would barely be met, albeit only by a minuscule margin.

A few days later, Reeves held a media briefing so unprecedented that it caused breakfast TV to interrupt its regular schedule. Several weeks before the actual budget, the country was put on alert: taxes would rise, with the primary cause cited as gloomy numbers provided by the OBR, in particular its conclusion that the UK was less productive, putting more in but getting less out.

And lo! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory broadcast rounds suggested recently, this is essentially what happened during the budget, that proved to be significant, harsh, and grim.

The Deceptive Alibi

The way in which Reeves deceived us concerned her justification, since these OBR forecasts didn't force her hand. She might have chosen different options; she might have provided other reasons, including on budget day itself. Prior to last year's election, Starmer promised precisely this kind of people power. "The promise of democracy. The strength of the vote. The potential for national renewal."

A year on, yet it is a lack of agency that jumps out in Reeves's breakfast speech. Our first Labour chancellor for a decade and a half portrays herself as an apolitical figure at the mercy of factors outside her influence: "Given the circumstances of the persistent challenges on our productivity … any chancellor of any political stripe would be standing here today, confronting the decisions that I face."

She certainly make decisions, only not the kind the Labour party cares to publicize. Starting April 2029 British workers as well as businesses will be contributing an additional £26bn a year in tax – but the majority of this will not be funding improved healthcare, new libraries, or enhanced wellbeing. Whatever nonsense comes from Nigel Farage, Badenoch and others, it is not being lavished upon "welfare claimants".

Where the Cash Really Goes

Rather than being spent, more than 50% of this additional revenue will in fact give Reeves a buffer against her own budgetary constraints. About 25% is allocated to paying for the administration's policy reversals. Reviewing the watchdog's figures and giving maximum benefit of the doubt to a Labour chancellor, only 17% of the taxes will fund genuinely additional spending, for example scrapping the limit on child benefit. Removing it "costs" the Treasury a mere £2.5bn, as it was always a bit of theatrical cruelty from George Osborne. A Labour government could and should abolished it immediately upon taking office.

The Real Target: Financial Institutions

Conservatives, Reform and the entire Blue Pravda have been barking about how Reeves fits the stereotype of left-wing finance ministers, taxing strivers to spend on shirkers. Labour backbenchers have been applauding her budget as a relief for their troubled consciences, safeguarding the most vulnerable. Each group could be 180-degrees wrong: Reeves's budget was primarily aimed at investment funds, speculative capital and the others in the financial markets.

Downing Street could present a compelling argument in its defence. The margins from the OBR were deemed too small for comfort, especially considering lenders demand from the UK the greatest borrowing cost of all G7 rich countries – exceeding that of France, which lost its leader, and exceeding Japan which has way more debt. Coupled with our policies to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget enables the Bank of England to cut its key lending rate.

It's understandable why those folk with red rosettes might not frame it this way next time they visit the doorstep. According to a consultant to Downing Street puts it, Reeves has effectively "weaponised" the bond market to act as an instrument of control over her own party and the voters. This is the reason Reeves can't resign, no matter what promises she breaks. It's the reason Labour MPs will have to knuckle down and vote that cut billions from social security, as Starmer indicated recently.

A Lack of Political Vision , a Broken Pledge

What's missing here is any sense of statecraft, of mobilising the finance ministry and the Bank to forge a fresh understanding with markets. Also absent is innate understanding of voters,