🔗 Share this article

The allegation represents a grave matter: that Rachel Reeves may have deceived Britons, frightening them into accepting massive additional taxes which could be spent on higher welfare payments. While exaggerated, this is not usual Westminster sparring; this time, the consequences are more serious. A week ago, detractors aimed at Reeves and Keir Starmer had been calling their budget "a mess". Today, it is branded as falsehoods, and Kemi Badenoch demanding the chancellor's resignation.

Such a serious charge requires straightforward responses, so let me provide my view. Has the chancellor tell lies? On current evidence, no. She told no blatant falsehoods. But, notwithstanding Starmer's yesterday's comments, it doesn't follow that there is no issue here and we can all move along. The Chancellor did mislead the public about the factors shaping her decisions. Was it to funnel cash to "benefits street", as the Tories assert? Certainly not, and the numbers demonstrate it.

A Reputation Sustains Another Blow, Yet Truth Should Win Out

Reeves has taken another blow to her standing, but, should facts continue to have anything to do with politics, Badenoch should call off her lynch mob. Maybe the resignation yesterday of OBR head, Richard Hughes, over the leak of its own documents will quench SW1's appetite for scandal.

Yet the real story is much more unusual than media reports indicate, and stretches wider and further than the political futures of Starmer and the 2024 intake. Fundamentally, this is an account concerning what degree of influence the public have over the governance of the nation. This should concern you.

Firstly, to the Core Details

After the OBR published last Friday some of the projections it provided to Reeves while she prepared the budget, the shock was instant. Not merely has the OBR never acted this way before (an "rare action"), its figures apparently contradicted the chancellor's words. Even as leaks from Westminster were about the grim nature of the budget was going to be, the OBR's own predictions were improving.

Take the government's so-called "unbreakable" fiscal rule, that by 2030 day-to-day spending for hospitals, schools, and other services would be completely paid for by taxes: at the end of October, the OBR calculated this would barely be met, albeit only by a minuscule margin.

A few days later, Reeves held a media briefing so unprecedented that it caused morning television to break from its usual fare. Several weeks prior to the real budget, the country was put on alert: taxes were going up, and the main reason cited as gloomy numbers from the OBR, in particular its finding that the UK was less efficient, investing more but getting less out.

And lo! It came to pass. Notwithstanding the implications from Telegraph editorials and Tory media appearances implied recently, this is essentially what transpired during the budget, which was big and painful and bleak.

The Misleading Justification

The way in which Reeves deceived us concerned her alibi, since these OBR forecasts didn't force her hand. She could have chosen different options; she might have provided other reasons, including on budget day itself. Before last year's election, Starmer promised exactly such public influence. "The hope of democracy. The power of the vote. The potential for national renewal."

One year later, and it's a lack of agency that jumps out in Reeves's breakfast speech. The first Labour chancellor for a decade and a half portrays herself to be 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 party would be standing here today, confronting the choices that I face."

She did make decisions, only not the kind Labour wishes to publicize. Starting April 2029 British workers and businesses will be paying another £26bn annually in tax – and the majority of this will not be funding better hospitals, public services, nor happier lives. Whatever nonsense comes from Nigel Farage, Badenoch and others, it isn't being lavished upon "benefits street".

Where the Cash Really Goes

Instead of going on services, over 50% of the extra cash will in fact give Reeves a buffer for her own fiscal rules. Approximately 25% is allocated to paying for the administration's policy reversals. Reviewing the watchdog's figures and giving maximum benefit of the doubt to Reeves, a mere 17% of the tax take will go on genuinely additional spending, for example abolishing the limit on child benefit. Removing it "will cost" the Treasury only £2.5bn, because it had long been a bit of theatrical cruelty from George Osborne. A Labour government could and should have binned it in its first 100 days.

The Real Target: The Bond Markets

Conservatives, Reform and the entire Blue Pravda have been barking about how Reeves fits the stereotype of Labour chancellors, taxing hard workers to fund the workshy. Labour backbenchers have been cheering her budget for being balm to their troubled consciences, safeguarding the disadvantaged. Both sides could be 180-degrees wrong: Reeves's budget was largely aimed at investment funds, hedge funds and the others in the bond markets.

The government can make a compelling argument for itself. The forecasts from the OBR were insufficient to feel secure, particularly considering lenders charge 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 far greater debt. Coupled with the policies to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say their plan allows the Bank of England to cut its key lending rate.

You can see why those folk with red rosettes might not couch it in such terms when they're on #Labourdoorstep. As one independent adviser to Downing Street says, Reeves has effectively "utilised" financial markets to act as a tool of control over Labour MPs and the electorate. It's the reason the chancellor can't resign, no matter what promises she breaks. It is also why Labour MPs must knuckle down and support measures that cut billions from social security, just as Starmer indicated yesterday.

Missing Political Vision and a Broken Promise

What is absent from this is any sense of statecraft, of harnessing the finance ministry and the Bank to forge a fresh understanding with investors. Also absent is intuitive knowledge of voters,