🔗 Share this article

This allegation is a serious one: suggesting Rachel Reeves may have misled Britons, frightening them to accept billions in extra taxes which would be spent on higher welfare payments. While exaggerated, this is not usual political sparring; on this occasion, the stakes could be damaging. Just last week, detractors of Reeves alongside Keir Starmer had been labeling their budget "a mess". Now, it's branded as lies, and Kemi Badenoch demanding the chancellor to quit.

Such a grave charge requires straightforward responses, therefore here is my assessment. Did the chancellor lied? On the available evidence, no. She told no major untruths. But, despite Starmer's recent remarks, it doesn't follow that there's nothing to see and we should move on. Reeves did misinform the public regarding the factors informing her decisions. Was this all to funnel cash to "welfare recipients", like the Tories claim? No, as the figures demonstrate it.

A Reputation Takes Another Blow, But Facts Should Win Out

The Chancellor has taken another blow to her standing, however, should facts continue to have anything to do with politics, Badenoch should call off her attack dogs. Perhaps the stepping down recently of OBR head, Richard Hughes, over the leak of its internal documents will satisfy SW1's thirst for blood.

But the real story is much more unusual compared to the headlines suggest, extending wider and further beyond the careers of Starmer and his class of '24. Fundamentally, this is a story concerning how much say you and I get in the governance of the nation. And it concern you.

Firstly, to the Core Details

When the OBR released last Friday some of the projections it shared with Reeves while she prepared the red book, the shock was immediate. Not merely has the OBR never acted this way before (described as an "exceptional move"), its figures apparently contradicted the chancellor's words. Even as rumors from Westminster were about how bleak the budget would have to be, the watchdog's forecasts were improving.

Consider the Treasury's so-called "iron-clad" fiscal rule, that by 2030 day-to-day spending for hospitals, schools, and other services would be completely funded by taxes: in late October, the watchdog reckoned it would just about be met, albeit by a tiny margin.

A few days later, Reeves held a media briefing so extraordinary that it caused breakfast TV to break from its usual fare. Several weeks before the real budget, the nation was put on alert: taxes were going up, with the main reason being pessimistic numbers from the OBR, in particular its conclusion suggesting the UK was less productive, putting more in but getting less out.

And lo! It came to pass. Despite the implications from Telegraph editorials and Tory broadcast rounds suggested recently, that is basically what happened during the budget, which was big and painful and bleak.

The Deceptive Alibi

The way in which Reeves deceived us concerned her justification, because those OBR forecasts did not compel her actions. She could have chosen different options; she might have provided alternative explanations, including during the statement. Prior to the recent election, Starmer promised exactly such public influence. "The hope of democracy. The strength of the vote. The potential for national renewal."

A year on, yet it's a lack of agency that is evident from Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half portrays herself as an apolitical figure at the mercy of forces beyond her control: "Given the circumstances of the long-term challenges on our productivity … any chancellor of any party would be in this position today, confronting the decisions that I face."

She did make decisions, just not one the Labour party wishes to broadcast. From April 2029 British workers and businesses are set to be paying an additional £26bn a year in tax – but the majority of this will not go towards spent on improved healthcare, public services, or enhanced wellbeing. Whatever nonsense is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "welfare claimants".

Where the Cash Really Goes

Instead of going on services, over 50% of this additional revenue will instead give Reeves cushion for her self-imposed fiscal rules. About 25% is allocated to paying for the administration's U-turns. Examining the watchdog's figures and being as generous as possible towards a Labour chancellor, a mere 17% of the tax take will fund actual new spending, for example abolishing the limit on child benefit. Its abolition "will cost" the Treasury only £2.5bn, because it had long been an act of political theatre by George Osborne. This administration should have abolished it in its first 100 days.

The True Audience: Financial Institutions

Conservatives, Reform and the entire right-wing media have spent days barking about how Reeves conforms to the caricature of Labour chancellors, soaking strivers to spend on shirkers. Labour backbenchers are applauding her budget as a relief for their social concerns, protecting the disadvantaged. Both sides could be 180-degrees wrong: Reeves's budget was primarily aimed at asset managers, hedge funds and participants within the financial markets.

The government could present a strong case in its defence. The forecasts provided by the OBR were deemed insufficient to feel secure, especially given that lenders demand from the UK the greatest borrowing cost among G7 developed nations – exceeding that of France, that recently lost its leader, higher than Japan which has way more debt. Combined with the measures to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves argue their plan allows the Bank of England to reduce interest rates.

It's understandable that those folk with Labour badges might not frame it in such terms when they visit #Labourdoorstep. According to one independent adviser to Downing Street says, Reeves has "weaponised" the bond market as an instrument of discipline over Labour MPs and the voters. It's why Reeves cannot resign, no matter what pledges she breaks. It's why Labour MPs must fall into line and support measures that cut billions from social security, as Starmer indicated yesterday.

Missing Statecraft and a Broken Pledge

What's missing from this is the notion of strategic governance, of harnessing the Treasury and the Bank to forge a fresh understanding with investors. Missing too is intuitive knowledge of voters,