🔗 Share this article

The accusation carries significant weight: suggesting Rachel Reeves may have lied to UK citizens, scaring them to accept massive additional taxes that would be spent on increased benefits. However hyperbolic, this is not typical political sparring; on this occasion, the consequences are more serious. Just last week, detractors aimed at Reeves and Keir Starmer were labeling their budget "a mess". Today, it is denounced as falsehoods, with Kemi Badenoch demanding Reeves to step down.

Such a grave accusation requires straightforward responses, so let me provide my view. Did the chancellor been dishonest? On the available information, no. She told no whoppers. But, despite Starmer's yesterday's remarks, it doesn't follow that there is no issue here and we should move on. Reeves did mislead the public regarding the considerations informing her decisions. Was this all to funnel cash towards "benefits street", as the Tories claim? Certainly not, as the numbers demonstrate this.

A Standing Takes Another Blow, Yet Truth Must Win Out

The Chancellor has taken another hit to her reputation, however, if facts still have anything to do with politics, Badenoch ought to call off her attack dogs. Perhaps the stepping down recently of OBR head, Richard Hughes, over the leak of its own documents will satisfy SW1's appetite for scandal.

But the true narrative is far stranger compared to media reports indicate, extending wider and further beyond the political futures of Starmer and his class of '24. At its heart, this is a story about how much say you and I have over the running of the nation. And it concern everyone.

Firstly, on to the Core Details

When the OBR released recently some of the forecasts it shared with Reeves as she prepared the red book, the shock was immediate. Not merely has the OBR not acted this way before (an "unusual step"), its numbers seemingly went against Reeves's statements. Even as rumors from Westminster suggested the grim nature of the budget would have to be, the watchdog's forecasts were improving.

Consider the Treasury's so-called "unbreakable" rule, that by 2030 daily spending for hospitals, schools, and the rest would be completely funded by taxes: in late October, the watchdog calculated this would barely be met, albeit by a tiny margin.

A few days later, Reeves held a media briefing so unprecedented it forced morning television to break from its regular schedule. Several weeks prior to the actual budget, the nation was put on alert: taxes were going up, with the main reason being gloomy numbers from the OBR, in particular its conclusion suggesting the UK had become less efficient, putting more in but getting less out.

And so! It happened. Notwithstanding what Telegraph editorials and Tory broadcast rounds implied over the weekend, this is basically what transpired at the budget, which was significant, harsh, and grim.

The Misleading Justification

Where Reeves misled us concerned her justification, since those OBR forecasts did not compel her actions. She might have chosen other choices; she could have given alternative explanations, even on budget day itself. Prior to last year's election, Starmer pledged exactly such public influence. "The promise of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it is a lack of agency that jumps out in Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half casts herself to be an apolitical figure buffeted by forces beyond her control: "Given the circumstances of the persistent challenges on our productivity … any finance minister of any political stripe would be standing here today, confronting the decisions that I face."

She certainly make a choice, only not one Labour wishes to publicize. Starting April 2029 UK workers and businesses will be contributing another £26bn a year in tax – and most of that will not go towards funding better hospitals, new libraries, nor happier lives. Whatever nonsense is spouted by Nigel Farage, Badenoch and their allies, it is not being lavished upon "benefits street".

Where the Money Really Goes

Instead of being spent, over 50% of this additional revenue will in fact provide Reeves cushion for her self-imposed fiscal rules. Approximately 25% goes on covering the administration's policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, a mere 17% of the tax take will fund actual new spending, such as scrapping 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. A Labour government should have have binned it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform along with all of Blue Pravda have spent days barking about the idea that Reeves conforms to the caricature of left-wing finance ministers, soaking strivers to fund the workshy. Party MPs have been applauding her budget as balm for their troubled consciences, safeguarding the disadvantaged. Both sides are completely mistaken: The Chancellor's budget was primarily targeted towards asset managers, hedge funds and participants within the bond markets.

Downing Street can make a strong case for itself. The margins provided by the OBR were deemed too small to feel secure, particularly given that bond investors demand from the UK the highest interest rate of all G7 rich countries – higher than France, which lost a prime minister, higher than Japan which has far greater debt. Combined with our measures to cap fuel bills, prescription charges as well as train fares, Starmer together with Reeves argue their plan enables the central bank to reduce its key lending rate.

You can see that those wearing Labour badges may choose not to couch it in such terms when they're on #Labourdoorstep. As one independent adviser for Downing Street says, Reeves has effectively "utilised" financial markets as a tool of control against Labour MPs and the voters. It's why Reeves can't resign, no matter what pledges she breaks. It is also why Labour MPs will have to fall into line and vote that cut billions from social security, just as Starmer indicated recently.

A Lack of Statecraft and an Unfulfilled Promise

What is absent from this is the notion of strategic governance, of harnessing the finance ministry and the central bank to forge a new accommodation with markets. Also absent is any innate understanding of voters,