🔗 Share this article

This allegation represents a grave matter: suggesting Rachel Reeves may have deceived Britons, scaring them into accepting massive additional taxes that would be spent on increased welfare payments. While hyperbolic, this is not typical Westminster sparring; this time, the consequences are more serious. A week ago, critics aimed at Reeves alongside Keir Starmer had been calling their budget "a shambles". Today, it is branded as falsehoods, and Kemi Badenoch calling for the chancellor's resignation.

This serious charge requires clear answers, therefore here is my assessment. Did the chancellor lied? On current information, no. There were no blatant falsehoods. But, notwithstanding Starmer's recent comments, it doesn't follow that there's nothing to see and we can all move along. The Chancellor did mislead the public regarding the factors shaping her decisions. Was it to funnel cash to "welfare recipients", like the Tories claim? No, as the numbers demonstrate it.

A Standing Sustains Another Blow, Yet Truth Must Win Out

Reeves has taken another blow to her reputation, but, if facts still matter in politics, Badenoch ought to call off her attack dogs. Maybe the stepping down recently of OBR head, Richard Hughes, over the unauthorized release of its internal documents will quench SW1's thirst for blood.

But the true narrative is far stranger compared to the headlines indicate, extending broader and deeper beyond the political futures of Starmer and the 2024 intake. Fundamentally, herein lies a story concerning how much say the public have over the running of our own country. This should concern everyone.

First, on to the Core Details

When the OBR released last Friday a portion of the projections it shared with Reeves as she wrote the red book, the surprise was immediate. Not merely had the OBR never acted this way before (described as an "exceptional move"), its figures 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 government's most "iron-clad" fiscal rule, stating by 2030 day-to-day spending for hospitals, schools, and other services must be completely paid for by taxes: in late 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 it forced breakfast TV to break from its regular schedule. Several weeks before the actual budget, the nation was put on alert: taxes were going up, with the main reason cited as pessimistic numbers provided by the OBR, in particular its conclusion suggesting the UK was less efficient, investing more but getting less out.

And lo! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory media appearances suggested over the weekend, this is basically what transpired at the budget, that proved to be significant, harsh, and grim.

The Misleading Alibi

The way in which Reeves deceived us concerned her alibi, because these OBR forecasts did not compel her actions. She might have chosen different options; she could have provided alternative explanations, even on budget day itself. Before last year's 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 a lack of agency that is evident in Reeves's pre-budget speech. The first Labour chancellor for a decade and a half casts herself to be a technocrat buffeted by forces outside her influence: "In the context of the persistent challenges with our productivity … any finance minister of any political stripe would be standing here today, facing the choices that I face."

She did make a choice, only not one Labour cares to publicize. Starting April 2029 British workers and businesses are set to be paying an additional £26bn a year in tax – and the majority of this will not go towards funding better hospitals, public services, nor happier lives. Whatever nonsense comes from Nigel Farage, Badenoch and others, it is not getting splashed on "benefits street".

Where the Cash Really Goes

Instead of going on services, over 50% of the extra cash will in fact give Reeves cushion against her self-imposed budgetary constraints. About 25% is allocated to paying for the administration's policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt to Reeves, a mere 17% of the tax take will fund genuinely additional spending, such as abolishing the limit on child benefit. Removing it "will cost" the Treasury a mere £2.5bn, because it was always an act of theatrical cruelty by George Osborne. A Labour government could and should have binned it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform and all of Blue Pravda have spent days barking about the idea that Reeves fits the caricature of left-wing finance ministers, taxing hard workers to spend on shirkers. Party MPs have been cheering her budget as balm for their social concerns, safeguarding the most vulnerable. Both sides are 180-degrees wrong: Reeves's budget was largely aimed at asset managers, speculative capital and the others in the bond markets.

The government can make a strong case for itself. The margins provided by the OBR were insufficient to feel secure, especially given that lenders charge the UK the greatest borrowing cost of all G7 rich countries – higher than France, which lost a prime minister, higher than Japan that carries far greater debt. Combined with our policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget allows the Bank of England to reduce its key lending rate.

It's understandable why those wearing red rosettes might not frame it in such terms next time they visit the doorstep. As a consultant to Downing Street says, Reeves has "utilised" the bond market as an instrument of discipline over Labour MPs and the voters. This is why the chancellor cannot resign, no matter what pledges are broken. It's the reason Labour MPs will have to fall into line and vote that cut billions from social security, just as Starmer promised yesterday.

Missing Statecraft and a Broken Pledge

What's missing here is the notion of strategic governance, of harnessing the Treasury and the Bank to forge a fresh understanding with markets. Also absent is innate understanding of voters,