🔗 Share this article

This allegation carries significant weight: that Rachel Reeves has misled the British public, scaring them to accept massive extra taxes that would be used for higher welfare payments. While exaggerated, this is not usual Westminster sparring; on this occasion, the consequences are more serious. A week ago, critics aimed at Reeves and Keir Starmer were calling their budget "a mess". Today, it is denounced as falsehoods, and Kemi Badenoch calling for Reeves to step down.

This grave accusation requires clear responses, so here is my view. Did the chancellor tell lies? On the available evidence, apparently not. There were no whoppers. But, despite Starmer's recent remarks, that doesn't mean there is no issue here and we should move on. Reeves did misinform the public regarding the factors shaping her choices. Was it to funnel cash to "benefits street", like the Tories claim? No, as the numbers demonstrate this.

A Standing Takes A Further Hit, Yet Truth Should Win Out

The Chancellor has sustained another blow to her standing, but, if facts continue to matter in politics, Badenoch should call off her attack dogs. Maybe the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the leak of its own documents will quench SW1's appetite for scandal.

But the true narrative is far stranger than media reports suggest, extending broader and deeper beyond the careers of Starmer and the 2024 intake. At its heart, herein lies a story about what degree of influence the public have in the running of the nation. And it should worry everyone.

First, on to Brass Tacks

After the OBR published last Friday some of the forecasts it provided to Reeves as she prepared the budget, the surprise was instant. Not only had the OBR not done such a thing before (described as an "rare action"), its numbers apparently contradicted the chancellor's words. While rumors from Westminster were about the grim nature of the budget was going to be, the watchdog's predictions were getting better.

Take the government's so-called "unbreakable" rule, that by 2030 day-to-day spending on hospitals, schools, and the rest would be completely paid for by taxes: in late October, the watchdog reckoned it would just about be met, albeit only by a minuscule margin.

Several days later, Reeves gave a media briefing so unprecedented it forced breakfast TV to break from its regular schedule. Weeks before the actual budget, the country was put on alert: taxes would rise, and the primary cause cited as gloomy numbers from the OBR, specifically its finding that the UK had become less efficient, putting more in but getting less out.

And lo! It happened. Despite the implications from Telegraph editorials combined with Tory broadcast rounds implied over the weekend, this is essentially what transpired during the budget, that proved to be significant, harsh, and grim.

The Misleading Alibi

The way in which Reeves misled us was her justification, since those OBR forecasts did not force her hand. She might have made different options; she might have given alternative explanations, including during the statement. Prior to last year's election, Starmer promised precisely this kind of people power. "The promise of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it's a lack of agency that jumps out from Reeves's pre-budget speech. The first Labour chancellor in 15 years casts herself as a technocrat at the mercy of factors outside her influence: "In the context of the persistent challenges on our productivity … any finance minister of any party would be standing here today, confronting the decisions that I face."

She certainly make a choice, just not one the Labour party wishes to publicize. Starting April 2029 British workers as well as businesses are set to be contributing another £26bn a year in tax – but most of that will not go towards spent on improved healthcare, public services, nor enhanced wellbeing. Whatever bilge comes from Nigel Farage, Badenoch and others, it isn't being lavished upon "welfare claimants".

Where the Money Actually Ends Up

Rather than going on services, over 50% of the additional revenue will in fact give Reeves a buffer against her self-imposed fiscal rules. Approximately 25% goes on paying for the government's own U-turns. Reviewing the watchdog's figures and being as generous as possible towards a Labour chancellor, a mere 17% of the tax take 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 theatrical cruelty from George Osborne. A Labour government should have have binned it in its first 100 days.

The True Audience: The Bond Markets

Conservatives, Reform along with all of Blue Pravda have been barking about the idea that Reeves conforms to the stereotype of Labour chancellors, soaking strivers to fund shirkers. Labour backbenchers have been cheering her budget for being balm for their troubled consciences, protecting the most vulnerable. Both sides are completely mistaken: The Chancellor's budget was primarily aimed at asset managers, speculative capital and participants within the bond markets.

Downing Street can make a compelling argument for itself. The forecasts from the OBR were deemed too small for comfort, particularly given that bond investors demand from the UK the greatest borrowing cost among G7 rich countries – exceeding that of France, which lost its leader, higher than Japan which has far greater debt. Coupled with our measures to cap fuel bills, prescription charges and train fares, Starmer together with Reeves can say this budget allows the Bank of England to cut interest rates.

You can see why those wearing Labour badges might not couch it in such terms when they visit the doorstep. As one independent adviser for Downing Street puts it, Reeves has "weaponised" the bond market as a tool of discipline against Labour MPs and the voters. This is why Reeves cannot resign, no matter what promises she breaks. It's why Labour MPs will have to fall into line and support measures that cut billions from social security, just as Starmer indicated yesterday.

Missing Political Vision , a Broken Promise

What is absent here is the notion of strategic governance, of mobilising the Treasury and the Bank to reach a new accommodation with markets. Missing too is any innate understanding of voters,