🔗 Share this article

This charge carries significant weight: that Rachel Reeves may have deceived UK citizens, frightening them into accepting massive additional taxes that could be funneled into increased welfare payments. While exaggerated, this is not usual Westminster sparring; this time, the stakes could be damaging. A week ago, detractors aimed at Reeves and Keir Starmer were labeling their budget "a mess". Now, it is denounced as lies, with Kemi Badenoch calling for the chancellor to quit.

Such a grave accusation requires clear responses, so let me provide my view. Did the chancellor tell lies? Based on the available information, no. She told no whoppers. However, despite Starmer's yesterday's comments, it doesn't follow that 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 funnel cash to "benefits street", as the Tories claim? Certainly not, as the numbers prove it.

A Reputation Takes A Further Blow, But Facts Must Prevail

Reeves has taken a further hit to her reputation, however, should facts continue to have anything to do with politics, Badenoch should stand down her attack dogs. Perhaps the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the leak of its own documents will quench Westminster's thirst for blood.

Yet the real story is much more unusual compared to media reports indicate, extending wider and further than the political futures of Starmer and his 2024 intake. Fundamentally, this is an account about how much say you and I have over the running of our own country. This should should worry you.

Firstly, to Brass Tacks

When the OBR released recently a portion of the forecasts it provided to Reeves while she prepared the budget, the shock was instant. Not merely has the OBR never acted this way before (an "rare action"), its figures seemingly went against the chancellor's words. While rumors from Westminster suggested the grim nature of the budget would have to be, the watchdog's forecasts were getting better.

Take the government's most "iron-clad" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and the rest must be wholly paid for by taxes: in late October, the OBR calculated it would barely be met, albeit by a minuscule margin.

A few days later, Reeves held a press conference so extraordinary it forced morning television to break from its regular schedule. Several weeks before the actual budget, the country was warned: taxes would rise, and the primary cause cited as pessimistic numbers provided by the OBR, in particular its finding that the UK was less efficient, putting more in but yielding less.

And lo! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory media appearances suggested recently, that is basically what transpired at the budget, which was significant, harsh, and grim.

The Misleading Alibi

The way in which Reeves deceived us concerned her justification, since those OBR forecasts didn't compel her actions. She could have made other choices; she could have provided alternative explanations, even on budget day itself. Before last year's election, Starmer pledged precisely this kind of people power. "The hope of democracy. The power of the vote. The potential for national renewal."

One year later, and it is powerlessness that is evident from Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half casts herself as an apolitical figure at the mercy of forces beyond her control: "Given the circumstances of the persistent challenges with our productivity … any finance minister of any political stripe would be standing here today, facing the decisions that I face."

She certainly make decisions, just not one Labour wishes to broadcast. Starting April 2029 British workers as well as businesses will be contributing an additional £26bn a year in tax – and the majority of this will not be spent on improved healthcare, new libraries, or enhanced wellbeing. Regardless of what bilge is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "welfare claimants".

Where the Money Really Goes

Rather than being spent, over 50% of this extra cash will in fact provide Reeves cushion against her self-imposed fiscal rules. About 25% goes on covering the government's own U-turns. Reviewing the OBR's calculations and being as generous as possible towards a Labour chancellor, a mere 17% of the tax take will fund genuinely additional spending, such as abolishing the limit on child benefit. Removing it "costs" the Treasury only £2.5bn, because it was always a bit of theatrical cruelty from George Osborne. A Labour government should have have binned it in its first 100 days.

The True Audience: Financial Institutions

The Tories, Reform and all of Blue Pravda have been railing against how Reeves fits the caricature of Labour chancellors, soaking hard workers to spend on shirkers. Labour backbenchers have been cheering her budget as balm to their social concerns, safeguarding the most vulnerable. Each group could be completely mistaken: Reeves's budget was largely targeted towards investment funds, hedge funds and participants within the financial markets.

The government can make a strong case for itself. The forecasts provided by the OBR were insufficient for comfort, particularly considering lenders demand from the UK the highest interest rate among G7 developed nations – exceeding that of France, which lost a prime minister, and exceeding Japan that carries way more debt. Combined with the policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves argue their plan allows the central bank to reduce its key lending rate.

You can see that those wearing Labour badges might not frame it in such terms next time they're on #Labourdoorstep. According to one independent adviser for Downing Street says, Reeves has effectively "weaponised" the bond market to act as an instrument of control against her own party and the electorate. This is the reason Reeves can't resign, regardless of which promises are broken. It is also why Labour MPs must fall into line and support measures to take billions off social security, just as Starmer promised yesterday.

A Lack of Political Vision and an Unfulfilled Promise

What is absent here is the notion of statecraft, of harnessing the finance ministry and the Bank to reach a fresh understanding with markets. Also absent is any innate understanding of voters,