🔗 Share this article

The accusation represents a grave matter: that Rachel Reeves may have deceived the British public, frightening them to accept massive additional taxes that would be funneled into higher welfare payments. However hyperbolic, this isn't usual political bickering; this time, the stakes are higher. Just last week, critics aimed at Reeves alongside Keir Starmer were calling their budget "a mess". Now, it is branded as falsehoods, and Kemi Badenoch demanding Reeves to step down.

Such a serious charge requires straightforward responses, so here is my view. Has the chancellor been dishonest? On the available evidence, no. She told no blatant falsehoods. However, notwithstanding Starmer's yesterday's remarks, it doesn't follow that there's no issue here and we should move on. Reeves did mislead the public regarding the considerations shaping her decisions. Was this all to channel cash to "benefits street", as the Tories assert? No, and the numbers prove this.

A Reputation Takes Another Blow, Yet Truth Should Prevail

The Chancellor has taken another hit to her standing, but, should facts continue to matter in politics, Badenoch ought to stand down her attack dogs. Maybe the resignation recently of OBR head, Richard Hughes, due to the unauthorized release of its internal documents will satisfy SW1's appetite for scandal.

Yet the real story is far stranger compared to media reports suggest, extending wider and further than the political futures of Starmer and the class of '24. Fundamentally, this is a story concerning how much say the public have in the governance of our own country. And it should worry everyone.

First, on to Brass Tacks

When the OBR published last Friday a portion of the projections it shared with Reeves while she prepared the red book, the shock was immediate. Not merely had the OBR never done such a thing before (an "unusual step"), its figures seemingly went against the chancellor's words. While leaks from Westminster were about the grim nature of the budget was going to be, the OBR's own forecasts were getting better.

Take the Treasury's so-called "iron-clad" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and the rest must be wholly paid for by taxes: in late October, the watchdog calculated this would barely be met, albeit only by a tiny margin.

Several days later, Reeves gave a press conference so unprecedented it forced breakfast TV to break from its usual fare. Weeks before the real budget, the country was warned: taxes were going up, with the main reason being gloomy numbers from the OBR, in particular its conclusion that the UK had become less efficient, investing more but yielding less.

And so! It happened. Despite what Telegraph editorials combined with Tory broadcast rounds suggested recently, this is basically what transpired during the budget, which was significant, harsh, and grim.

The Deceptive Alibi

Where Reeves misled us was her alibi, since those OBR forecasts did not compel her actions. She could have chosen different options; she could have provided other reasons, including during the statement. Prior to the recent election, Starmer pledged precisely this kind of public influence. "The hope of democracy. The power 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 in 15 years portrays herself to be an apolitical figure buffeted by factors beyond her control: "Given the circumstances of the persistent challenges with our productivity … any finance minister of any political stripe would be in this position today, confronting the decisions that I face."

She certainly make a choice, only not one the Labour party cares to broadcast. From April 2029 British workers as well as businesses are set to be paying another £26bn a year in taxes – but most of that will not be funding improved healthcare, new libraries, nor happier lives. Whatever nonsense is spouted by Nigel Farage, Badenoch and others, it isn't being lavished upon "benefits street".

Where the Money Really Goes

Rather than being spent, more than 50% of the additional revenue will instead give Reeves cushion for her own budgetary constraints. About 25% is allocated to paying for the administration's policy reversals. Examining the watchdog's figures and giving maximum benefit of the doubt towards Reeves, a mere 17% of the taxes will go on genuinely additional spending, for example abolishing the two-child cap on child benefit. Removing it "will cost" the Treasury a mere £2.5bn, because it was always an act of political theatre by George Osborne. This administration should have have binned it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform along with the entire right-wing media have spent days railing against the idea that Reeves conforms to the stereotype of left-wing finance ministers, soaking hard workers to fund shirkers. Labour backbenchers have been cheering her budget for being balm to their troubled consciences, protecting the disadvantaged. Each group could be 180-degrees wrong: Reeves's budget was primarily aimed at asset managers, speculative capital and the others in the financial markets.

The government can make a compelling argument for itself. The forecasts from the OBR were deemed too small to feel secure, especially considering bond investors demand from the UK the highest interest rate of all G7 developed nations – higher than France, which lost a prime minister, higher than Japan that carries far greater debt. Combined with the policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget enables the central bank to cut interest rates.

You can see that those wearing red rosettes might not frame it this way next time they visit the doorstep. According to a consultant for Downing Street puts it, Reeves has effectively "weaponised" financial markets as an instrument of control over her own party and the voters. It's why Reeves cannot resign, regardless of which promises she breaks. It's why Labour MPs must fall into line and support measures to take billions off social security, just as Starmer promised yesterday.

A Lack of Statecraft and an Unfulfilled Promise

What is absent here is any sense of strategic governance, of mobilising the finance ministry and the Bank to reach a fresh understanding with markets. Missing too is intuitive knowledge of voters,