🔗 Share this article

The accusation represents a grave matter: suggesting Rachel Reeves may have misled the British public, scaring them to accept billions in extra taxes which would be spent on increased benefits. However exaggerated, this is not usual Westminster sparring; this time, the consequences are more serious. A week ago, detractors aimed at Reeves alongside Keir Starmer were labeling their budget "disorderly". Today, it's denounced as lies, and Kemi Badenoch demanding the chancellor to quit.

This serious accusation demands straightforward answers, therefore here is my view. Has the chancellor lied? Based on the available information, apparently not. She told no major untruths. However, despite Starmer's recent comments, that doesn't mean there's nothing to see and we should move on. Reeves did mislead the public regarding the considerations informing her choices. Was this all to channel cash to "welfare recipients", like the Tories assert? No, as the numbers demonstrate it.

A Reputation Sustains A Further Blow, But Facts Must Win Out

The Chancellor has sustained another hit to her standing, but, should facts continue to have anything to do with politics, Badenoch ought to stand down her lynch mob. Maybe the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the unauthorized release of its internal documents will satisfy Westminster's appetite for scandal.

Yet the true narrative is much more unusual compared to the headlines indicate, extending wider and further beyond the political futures of Starmer and his 2024 intake. Fundamentally, this is a story about how much say you and I have in the running of the nation. And it should worry you.

First, on to Brass Tacks

After the OBR published recently a portion of the forecasts it provided to Reeves while she wrote the budget, the shock was instant. Not only had the OBR not acted this way before (described as an "rare action"), its numbers apparently contradicted the chancellor's words. While rumors from Westminster were about how bleak the budget would have to be, the OBR's own predictions were improving.

Consider the Treasury's most "iron-clad" fiscal rule, stating by 2030 daily spending on hospitals, schools, and other services must be wholly funded by taxes: at the end of October, the OBR calculated it would just about be met, albeit by a tiny margin.

A few days later, Reeves gave a press conference so extraordinary that it caused morning television to interrupt its regular schedule. Several weeks before the real budget, the nation was warned: taxes were going up, with the primary cause being pessimistic numbers from the OBR, specifically its conclusion suggesting the UK had become less efficient, putting more in but yielding less.

And so! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory media appearances suggested over the weekend, this is basically what transpired at the budget, that proved to be big and painful and bleak.

The Misleading Justification

The way in which Reeves deceived us concerned her alibi, because those OBR forecasts did not compel her actions. She could have made other choices; she could have given other reasons, including during the statement. Prior to the recent election, Starmer promised exactly such people power. "The promise of democracy. The power of the vote. The potential for national renewal."

One year later, yet it's powerlessness that jumps out in Reeves's pre-budget speech. The first Labour chancellor for a decade and a half casts herself as an apolitical figure at the mercy of factors outside her influence: "In the context of the persistent challenges on our productivity … any chancellor of any party would be standing here today, confronting the decisions that I face."

She did make decisions, just not the kind Labour cares to publicize. From April 2029 British workers and businesses are set to be paying an additional £26bn annually in taxes – but most of that will not be spent on better hospitals, new libraries, or enhanced wellbeing. Whatever nonsense is spouted by Nigel Farage, Badenoch and others, it is not being lavished upon "welfare claimants".

Where the Cash Actually Ends Up

Instead of being spent, over 50% of this additional revenue will in fact provide Reeves cushion against her own budgetary constraints. Approximately 25% is allocated to paying for the administration's U-turns. Examining the watchdog's figures and giving maximum benefit of the doubt towards Reeves, only 17% of the taxes will fund genuinely additional spending, for example scrapping the two-child cap on child benefit. Removing it "costs" the Treasury a mere £2.5bn, as it had long been a bit of political theatre by George Osborne. This administration should have abolished it immediately upon taking office.

The Real Target: Financial Institutions

Conservatives, Reform and all of Blue Pravda have been barking about how Reeves conforms to the stereotype of left-wing finance ministers, taxing hard workers to spend on the workshy. Party MPs are applauding her budget for being balm to their troubled consciences, protecting the most vulnerable. Both sides could be completely mistaken: The Chancellor's budget was largely targeted towards asset managers, hedge funds and the others in the bond markets.

Downing Street could present a strong case in its defence. The forecasts from the OBR were insufficient to feel secure, particularly considering lenders demand from the UK the highest interest rate among G7 rich countries – higher than France, that recently lost a prime minister, and exceeding Japan that carries far greater debt. Coupled with our policies to hold down fuel bills, prescription charges as well as 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 may choose not to couch it in such terms when they're on #Labourdoorstep. As a consultant to Downing Street says, Reeves has "weaponised" financial markets as an instrument of discipline over Labour MPs and the electorate. This is why Reeves cannot resign, regardless of which promises she breaks. It's the reason Labour MPs must knuckle down and vote to take billions off social security, just as Starmer promised yesterday.

A Lack of Statecraft , a Broken Pledge

What's missing here is the notion of strategic governance, of mobilising the Treasury and the Bank to reach a fresh understanding with investors. Missing too is any intuitive knowledge of voters,