🔗 Share this article

This allegation is a serious one: that Rachel Reeves may have misled the British public, frightening them into accepting massive additional taxes that would be used for increased benefits. However exaggerated, this isn't usual political sparring; on this occasion, the consequences are more serious. A week ago, detractors of Reeves alongside Keir Starmer were labeling their budget "uncoordinated". Now, it's denounced as falsehoods, with Kemi Badenoch calling for the chancellor to quit.

Such a serious charge requires clear answers, so here is my view. Has the chancellor lied? On current information, no. There were no major untruths. But, despite Starmer's recent remarks, that doesn't mean there is nothing to see and we should move on. The Chancellor did mislead the public regarding the considerations shaping her decisions. Was it to funnel cash to "welfare recipients", like the Tories claim? Certainly not, as the figures demonstrate this.

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

Reeves has taken another hit to her reputation, however, if facts continue to have anything to do with politics, Badenoch should call off her lynch mob. Maybe the stepping down recently of OBR head, Richard Hughes, over the leak of its own documents will quench Westminster's appetite for scandal.

Yet the true narrative is far stranger than media reports suggest, extending broader and deeper beyond the political futures of Starmer and his 2024 intake. Fundamentally, this is an account concerning what degree of influence you and I have over the governance of the nation. And it concern you.

Firstly, to the Core Details

When the OBR released last Friday a portion of the forecasts it shared with Reeves as she prepared the red book, the shock was immediate. Not merely had the OBR not done such a thing before (an "exceptional move"), its figures apparently contradicted Reeves's statements. Even as leaks from Westminster were about how bleak the budget would have to be, the OBR's own forecasts were getting better.

Take the Treasury's so-called "iron-clad" rule, stating by 2030 day-to-day spending for hospitals, schools, and the rest would be completely funded by taxes: in late October, the watchdog calculated it would barely be met, albeit by a tiny margin.

A few days later, Reeves held a press conference so extraordinary that it caused breakfast TV to break from its usual fare. Weeks prior to the actual budget, the country was warned: taxes would rise, with the main reason cited as pessimistic numbers provided by the OBR, in particular its conclusion that the UK was less productive, investing more but getting less out.

And lo! It came to pass. Despite what Telegraph editorials and Tory media appearances implied recently, this is essentially what happened during the budget, that proved to be big and painful and bleak.

The Misleading Alibi

Where Reeves misled us concerned her justification, because these OBR forecasts didn't compel her actions. She might have chosen other choices; she might have given alternative explanations, even on budget day itself. Prior to last year's election, Starmer pledged precisely this kind of people power. "The hope of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it's powerlessness that jumps out in Reeves's breakfast speech. The first Labour chancellor for a decade and a half portrays herself to be a technocrat at the mercy of factors outside her influence: "In the context of the persistent challenges with our productivity … any finance minister of any party would be standing here today, facing the choices that I face."

She certainly make decisions, only not the kind Labour wishes to publicize. Starting April 2029 British workers as well as businesses will be contributing another £26bn a year in taxes – and most of that will not go towards spent on better hospitals, public services, or happier lives. Regardless of what bilge is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "benefits street".

Where the Cash Actually Ends Up

Rather than being spent, more than 50% of this extra cash will in fact provide Reeves cushion for her self-imposed fiscal rules. About 25% goes on paying for the administration's U-turns. Examining the watchdog's figures and being as generous as possible towards Reeves, only 17% of the taxes will fund actual new spending, such as scrapping the limit on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, because it was always an act of theatrical cruelty by George Osborne. A Labour government should have have binned it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform along with the entire Blue Pravda have been barking about the idea that Reeves fits the caricature of Labour chancellors, soaking hard workers to spend on shirkers. Labour backbenchers have been applauding her budget as a relief to their social concerns, safeguarding the disadvantaged. Both sides are completely mistaken: The Chancellor's budget was primarily aimed at investment funds, hedge funds and participants within the financial markets.

The government can make a strong case in its defence. The margins from the OBR were deemed too small for comfort, especially given that lenders demand from the UK the greatest borrowing cost of all G7 developed nations – higher than France, that recently lost a prime minister, and exceeding Japan that carries way more debt. Combined with our measures to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves can say this budget enables the central bank to cut its key lending rate.

You can see that those folk with red rosettes may choose not to couch it this way next time they visit the doorstep. According to a consultant for Downing Street says, Reeves has "weaponised" the bond market as an instrument of discipline against Labour MPs and the electorate. It's the reason the chancellor can't resign, regardless of which pledges are broken. It's the reason Labour MPs will have to knuckle down and vote to take billions off social security, as Starmer promised yesterday.

Missing Statecraft and a Broken Promise

What's missing from this is the notion of statecraft, of harnessing the Treasury and the central bank to reach a fresh understanding with investors. Also absent is innate understanding of voters,