🔗 Share this article

This allegation is a serious one: that Rachel Reeves has lied to Britons, frightening them to accept massive extra taxes that could be used for increased welfare payments. While hyperbolic, this isn't usual political bickering; on this occasion, the stakes are higher. Just last week, critics aimed at Reeves and Keir Starmer had been labeling their budget "uncoordinated". Today, it's branded as lies, and Kemi Badenoch calling for Reeves to step down.

This serious accusation requires clear responses, so here is my assessment. Has the chancellor lied? Based on current information, no. She told no major untruths. However, notwithstanding Starmer's recent comments, that doesn't mean there is nothing to see and we should move on. The Chancellor did misinform the public regarding the considerations shaping her choices. Was it to channel cash to "benefits street", as the Tories claim? No, as the figures demonstrate this.

A Standing Takes A Further Blow, Yet Truth Should Prevail

The Chancellor has taken a further blow to her standing, however, if facts continue to have anything to do with politics, Badenoch ought to stand down her lynch mob. Maybe the resignation recently of OBR head, Richard Hughes, due to the leak of its internal documents will satisfy SW1's appetite for scandal.

But the true narrative is much more unusual compared to media reports suggest, extending broader and deeper beyond the political futures of Starmer and his class of '24. At its heart, this is a story concerning how much say you and I get in the running of the nation. This should should worry everyone.

First, on to the Core Details

When the OBR published last Friday some of the forecasts it shared with Reeves while she prepared the budget, the shock was immediate. Not merely has the OBR never acted this way before (described as an "unusual step"), its numbers apparently contradicted the chancellor's words. While rumors from Westminster suggested how bleak the budget would have to be, the watchdog's forecasts were improving.

Take the Treasury's most "unbreakable" fiscal rule, that by 2030 day-to-day spending for hospitals, schools, and other services would be wholly funded by taxes: at the end of October, the OBR calculated this would just about be met, albeit only by a tiny margin.

Several days later, Reeves held a media briefing so extraordinary it forced morning television to interrupt its regular schedule. Several weeks prior to the real budget, the country was put on alert: taxes were going up, with the primary cause cited as pessimistic numbers provided by the OBR, specifically its finding suggesting the UK had become less efficient, investing more but getting less out.

And lo! It happened. Notwithstanding what Telegraph editorials combined with Tory media appearances suggested over the weekend, this is essentially what happened at the budget, that proved to be big and painful and bleak.

The Deceptive Alibi

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

A year on, and it is powerlessness that is evident in Reeves's pre-budget speech. The first Labour chancellor in 15 years casts herself to be an apolitical figure buffeted by factors beyond her control: "Given the circumstances of the persistent challenges on our productivity … any finance minister of any political stripe would be in this position today, facing the choices that I face."

She did make decisions, only not the kind the Labour party wishes to broadcast. Starting April 2029 UK workers and businesses will be paying another £26bn annually in tax – but most of that will not be spent on improved healthcare, public services, or enhanced wellbeing. Whatever nonsense comes from Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Money Actually Ends Up

Rather than being spent, more than 50% of the extra cash will in fact provide Reeves a buffer for her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the administration's U-turns. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, a mere 17% of the taxes will fund actual new spending, such as scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury only £2.5bn, because it had long been a bit of theatrical cruelty by George Osborne. This administration could and should have binned it in its first 100 days.

The True Audience: Financial Institutions

The Tories, Reform along with all of right-wing media have spent days barking about the idea that Reeves fits the caricature of left-wing finance ministers, taxing strivers to spend on the workshy. Labour backbenchers have been cheering her budget for being a relief for their social concerns, protecting the most vulnerable. Both sides could be completely mistaken: Reeves's budget was largely targeted towards asset managers, speculative capital and participants within the bond markets.

The government could present a compelling argument in its defence. The margins from the OBR were deemed too small for comfort, particularly considering bond investors demand from the UK the highest interest rate of all G7 rich countries – exceeding that of France, that recently lost its leader, and exceeding Japan which has way more debt. Coupled with our measures to hold down fuel bills, prescription charges as well as train fares, Starmer together with Reeves argue their plan allows the Bank of England to reduce its key lending rate.

It's understandable that those wearing red rosettes might not frame it in such terms when they visit #Labourdoorstep. As a consultant for Downing Street puts it, Reeves has "weaponised" the bond market to act as an instrument of discipline against her own party and the voters. It's why the chancellor cannot resign, no matter what promises are broken. It's why Labour MPs will have to knuckle down and vote to take billions off social security, just as Starmer promised yesterday.

A Lack of Statecraft , an Unfulfilled Promise

What is absent here is the notion of statecraft, of mobilising the Treasury and the Bank to forge a new accommodation with investors. Also absent is intuitive knowledge of voters,