🔗 Share this article

This charge carries significant weight: suggesting Rachel Reeves has deceived the British public, scaring them to accept massive additional taxes which could be funneled into higher welfare payments. However hyperbolic, this is not usual Westminster sparring; this time, the stakes are more serious. Just last week, detractors of Reeves alongside Keir Starmer were calling their budget "a mess". Today, it is denounced as lies, with Kemi Badenoch calling for the chancellor's resignation.

This grave charge demands clear answers, so let me provide my assessment. Has the chancellor been dishonest? Based on current evidence, no. There were no major untruths. But, notwithstanding Starmer's yesterday's comments, it doesn't follow that there is no issue here and we can all move along. Reeves did mislead the public regarding the considerations shaping her choices. Was it to funnel cash to "welfare recipients", like the Tories claim? No, and the figures demonstrate this.

A Reputation Sustains A Further Hit, Yet Truth Must Win Out

Reeves has sustained another hit to her standing, however, should facts continue to have anything to do with politics, Badenoch ought to call off her lynch mob. Perhaps the resignation recently of OBR head, Richard Hughes, over the unauthorized release of its own documents will quench Westminster's thirst for blood.

Yet the real story is much more unusual than the headlines indicate, extending broader and deeper than the political futures of Starmer and his class of '24. Fundamentally, herein lies an account about what degree of influence you and I get in the running of the nation. And it concern you.

First, on to the Core Details

After the OBR published last Friday some of the projections it provided to Reeves as she wrote the red book, the surprise was instant. Not only has the OBR not done such a thing before (described as an "unusual step"), its figures apparently went against the chancellor's words. While rumors from Westminster were about the grim nature of the budget was going to be, the watchdog's forecasts were improving.

Consider the government's so-called "iron-clad" rule, stating by 2030 day-to-day spending on hospitals, schools, and other services must be wholly paid for by taxes: in late October, the watchdog calculated this would just about be met, albeit by a minuscule margin.

Several days later, Reeves held a press conference so extraordinary that it caused breakfast TV to break from its regular schedule. Several weeks before the real budget, the nation was put on alert: taxes were going up, and the primary cause being gloomy numbers provided by the OBR, in particular its finding suggesting the UK was less efficient, putting more in but getting less out.

And lo! It happened. Despite the implications from Telegraph editorials and Tory broadcast rounds implied over the weekend, this is essentially what transpired during the budget, which was significant, harsh, and grim.

The Deceptive Justification

Where Reeves misled us concerned her alibi, because those OBR forecasts didn't force her hand. She could have made other choices; she might have given other reasons, even on budget day itself. Before the recent election, Starmer promised exactly such people power. "The hope of democracy. The power of the vote. The potential for national renewal."

One year later, and it is a lack of agency that is evident from Reeves's breakfast speech. Our first Labour chancellor for a decade and a half portrays herself as an apolitical figure at the mercy of forces outside her influence: "In the context of the long-term challenges on our productivity … any chancellor of any political stripe would be in this position today, confronting the decisions that I face."

She did make a choice, just not one Labour cares to broadcast. From April 2029 UK workers and businesses are set to be contributing an additional £26bn a year in tax – but most of that will not go towards spent on improved healthcare, new libraries, nor enhanced wellbeing. Whatever bilge is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "benefits street".

Where the Cash Really Goes

Rather than being spent, over 50% of the additional revenue will in fact give Reeves cushion against her own budgetary constraints. About 25% is allocated to covering the government's own policy reversals. Examining the OBR's calculations and being as generous as possible to Reeves, only 17% of the taxes will go on genuinely additional spending, such as abolishing the two-child cap on child benefit. Its abolition "will cost" the Treasury only £2.5bn, as it was always a bit of theatrical cruelty from George Osborne. A Labour government could and should have binned it immediately upon taking office.

The True Audience: The Bond Markets

The Tories, Reform along with the entire Blue Pravda have been railing against the idea that Reeves fits the stereotype of Labour chancellors, soaking strivers to spend on the workshy. Party MPs have been applauding her budget for being a relief for their troubled consciences, protecting the disadvantaged. Each group could be completely mistaken: The Chancellor's budget was largely aimed at asset managers, hedge funds and participants within the bond markets.

Downing Street could present a strong case for itself. The forecasts provided by the OBR were deemed insufficient to feel secure, particularly given that lenders demand from the UK the highest interest rate of all G7 developed nations – exceeding that of France, which lost a prime minister, higher than Japan that carries way more debt. Coupled with our policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves can say their plan enables the Bank of England to cut its key lending rate.

It's understandable that those folk with Labour badges may choose not to frame it in such terms next time they're on #Labourdoorstep. As a consultant for Downing Street puts it, Reeves has "weaponised" financial markets as an instrument of discipline over Labour MPs and the voters. It's the reason Reeves cannot resign, regardless of which pledges she breaks. It's the reason Labour MPs must knuckle down and support measures that cut billions from social security, as Starmer indicated yesterday.

A Lack of Political Vision and a Broken Pledge

What is absent here is any sense of strategic governance, of mobilising the Treasury and the central bank to reach a fresh understanding with investors. Also absent is any innate understanding of voters,