🔗 Share this article

This charge is a serious one: suggesting Rachel Reeves may have misled Britons, frightening them into accepting massive additional taxes which would be spent on increased benefits. While exaggerated, this isn't usual political sparring; on this occasion, the consequences are more serious. Just last week, detractors aimed at Reeves and Keir Starmer had been calling their budget "uncoordinated". Today, it is denounced as falsehoods, and Kemi Badenoch demanding the chancellor's resignation.

Such a grave accusation requires straightforward answers, so let me provide my view. Has the chancellor tell lies? On current evidence, apparently not. There were no blatant falsehoods. However, notwithstanding Starmer's recent remarks, that doesn't mean there is no issue here and we can all move along. 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, and the numbers prove this.

A Reputation Takes Another Hit, Yet Truth Should Win Out

Reeves has sustained a further blow to her standing, but, should facts still matter in politics, Badenoch ought to stand down her lynch mob. Maybe the stepping down yesterday of OBR head, Richard Hughes, due to the unauthorized release of its internal documents will quench Westminster's appetite for scandal.

Yet the true narrative is far stranger than media reports indicate, and stretches wider and further than the political futures of Starmer and the class of '24. Fundamentally, this is a story concerning how much say the public get in the governance of our own country. And it should worry you.

First, on to the Core Details

When the OBR released recently a portion of the projections it shared with Reeves as she prepared the red book, the shock was instant. Not merely has the OBR not acted this way before (described as an "rare action"), its numbers seemingly contradicted the chancellor's words. While rumors from Westminster suggested the grim nature of the budget was going to be, the watchdog's forecasts were getting better.

Take the government's most "unbreakable" rule, that by 2030 daily spending on hospitals, schools, and the rest must be wholly paid for by taxes: at the end of October, the OBR calculated this would just about be met, albeit only by a tiny margin.

Several days later, Reeves held a media briefing so unprecedented that it caused breakfast TV to interrupt its usual fare. Several weeks prior to the real budget, the country was put on alert: taxes were going up, with the primary cause cited as pessimistic numbers provided by the OBR, specifically its conclusion that the UK was less efficient, putting more in but getting less out.

And lo! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory broadcast rounds implied recently, this is basically what transpired during the budget, that proved to be big and painful and bleak.

The Misleading Alibi

Where Reeves misled us was her alibi, because these OBR forecasts didn't compel her actions. She could have made different options; she might have given alternative explanations, even on budget day itself. Before last year's election, Starmer promised precisely this kind of public influence. "The promise of democracy. The power of the vote. The potential for national renewal."

A year on, and it is powerlessness that jumps out from Reeves's breakfast speech. Our first Labour chancellor in 15 years casts herself to be a technocrat buffeted by forces outside her influence: "In the context of the persistent challenges with our productivity … any chancellor of any party would be in this position today, facing the decisions that I face."

She certainly make a choice, only not one Labour wishes to publicize. Starting April 2029 British workers as well as businesses are set to be contributing another £26bn a year in tax – and most of that will not be spent on improved healthcare, public services, or enhanced wellbeing. Whatever nonsense is spouted by Nigel Farage, Badenoch and others, it isn't being lavished upon "welfare claimants".

Where the Money Really Goes

Rather than going on services, more than 50% of the additional revenue will in fact give Reeves cushion against her own fiscal rules. About 25% is allocated to covering the administration's policy reversals. Examining the OBR's calculations and being as generous as possible to a Labour chancellor, only 17% of the taxes will go on actual new spending, such as scrapping the limit on child benefit. Removing it "will cost" the Treasury only £2.5bn, because it was always an act of political theatre by George Osborne. This administration could and should have binned it immediately upon taking office.

The Real Target: The Bond Markets

The Tories, Reform along with the entire Blue Pravda have spent days barking about how Reeves fits the caricature of left-wing finance ministers, soaking strivers to spend on the workshy. Party MPs have been applauding her budget as a relief for their troubled consciences, safeguarding the most vulnerable. Both sides are 180-degrees wrong: The Chancellor's budget was primarily targeted towards asset managers, speculative capital and participants within the financial markets.

Downing Street can make a strong case for itself. The forecasts from the OBR were too small to feel secure, especially given that bond investors charge the UK the greatest borrowing cost of all G7 rich countries – higher than France, which lost a prime minister, and exceeding Japan that carries far greater debt. Combined with our measures to hold down fuel bills, prescription charges as well as train fares, Starmer together with Reeves can say this budget enables the central bank to cut interest rates.

You can see why those wearing Labour badges might not frame it in such terms when they visit #Labourdoorstep. According to a consultant to Downing Street says, Reeves has "utilised" financial markets as a tool of control over her own party and the voters. This is why the chancellor cannot resign, no matter what pledges she breaks. It is also the reason Labour MPs must knuckle down and vote to take billions off social security, just as Starmer promised recently.

Missing Statecraft , an Unfulfilled Pledge

What's missing from this is the notion of statecraft, of harnessing the Treasury and the Bank to reach a new accommodation with markets. Also absent is intuitive knowledge of voters,