🔗 Share this article

This accusation is a serious one: suggesting Rachel Reeves may have misled Britons, frightening them to accept massive additional taxes which could be funneled into increased benefits. While exaggerated, this is not typical political sparring; this time, the consequences are higher. A week ago, critics of Reeves and Keir Starmer had been calling their budget "a mess". Today, it's branded as falsehoods, and Kemi Badenoch calling for Reeves to step down.

This serious accusation requires clear responses, so here is my assessment. Did the chancellor been dishonest? On the available evidence, no. There were no major untruths. However, notwithstanding Starmer's recent remarks, that doesn't mean there is no issue here and we should move on. The Chancellor did misinform the public regarding the factors informing her decisions. Was it to channel cash to "benefits street", like the Tories claim? Certainly not, and the numbers demonstrate it.

A Reputation Takes A Further Hit, But Facts Should Prevail

The Chancellor has taken a further hit to her reputation, but, if facts continue to have anything to do with politics, Badenoch ought to call off her attack dogs. Maybe the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will quench SW1's appetite for scandal.

But the real story is much more unusual compared to media reports indicate, extending broader and deeper than the political futures of Starmer and the 2024 intake. Fundamentally, herein lies a story about what degree of influence you and I get in the governance of our own country. And it should worry everyone.

First, on to Brass Tacks

When the OBR published recently a portion of the forecasts it shared with Reeves while she wrote the budget, the surprise was instant. Not only had the OBR not done such a thing before (an "exceptional move"), its numbers seemingly went against Reeves's statements. While leaks from Westminster suggested how bleak the budget would have to be, the OBR's own forecasts were getting better.

Take the government's so-called "unbreakable" fiscal rule, stating by 2030 day-to-day spending on hospitals, schools, and other services would be wholly paid for by taxes: in late October, the watchdog reckoned this would barely be met, albeit only by a tiny margin.

Several days later, Reeves gave a press conference so unprecedented that it caused breakfast TV to interrupt its usual fare. Several weeks prior to the actual budget, the country was put on alert: taxes would rise, and the primary cause being pessimistic numbers provided by the OBR, in particular its finding suggesting the UK had become less efficient, putting more in but getting less out.

And so! It happened. Notwithstanding what Telegraph editorials and Tory broadcast rounds implied over the weekend, this is basically what transpired during the budget, that proved to be big and painful and bleak.

The Misleading Alibi

Where Reeves misled us concerned her justification, since those OBR forecasts didn't compel her actions. She could have chosen other choices; she could have given alternative explanations, even during the statement. Before last year's election, Starmer promised exactly such public influence. "The promise of democracy. The power of the vote. The potential for national renewal."

A year on, yet it is a lack of agency that is evident from Reeves's breakfast speech. The first Labour chancellor for a decade and a half casts herself to be an apolitical figure buffeted by forces beyond her control: "In the context of the long-term challenges with our productivity … any chancellor of any party would be in this position today, confronting the decisions that I face."

She did make decisions, only not the kind Labour wishes to broadcast. From April 2029 British workers as well as businesses will be contributing another £26bn a year in tax – but the majority of this will not go towards spent on better hospitals, new libraries, nor happier lives. Whatever bilge comes from Nigel Farage, Badenoch and their allies, it isn't being lavished upon "benefits street".

Where the Cash Really Goes

Instead of going on services, more than 50% of the additional revenue will instead provide Reeves cushion for her own budgetary constraints. About 25% goes on covering the government's own U-turns. Examining the OBR's calculations and giving maximum benefit of the doubt towards Reeves, a mere 17% of the taxes will fund actual new spending, such as abolishing the two-child cap on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, because it had long been a bit of theatrical cruelty from George Osborne. A Labour government should have abolished it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform along with all of Blue Pravda have spent days barking about the idea that Reeves conforms to the caricature of Labour chancellors, soaking strivers to spend on the workshy. Party MPs have been applauding her budget as a relief for their troubled consciences, protecting the most vulnerable. Each group could be completely mistaken: Reeves's budget was largely targeted towards investment funds, hedge funds and the others in the bond markets.

Downing Street could present a compelling argument for itself. The margins provided by the OBR were insufficient to feel secure, especially considering bond investors demand from the UK the greatest borrowing cost among G7 developed nations – higher than France, which lost a prime minister, higher than Japan that carries way more debt. Combined with the policies to cap fuel bills, prescription charges and train fares, Starmer and Reeves argue this budget allows the Bank of England to reduce its key lending rate.

You can see that those folk with Labour badges may choose not to frame it in such terms when they're on #Labourdoorstep. According to a consultant for Downing Street says, Reeves has "utilised" the bond market to act as a tool of control over Labour MPs and the electorate. It's why the chancellor can't resign, regardless of which promises are broken. It's why Labour MPs will have to knuckle down and support measures to take billions off social security, as Starmer indicated yesterday.

A Lack of Political Vision , a Broken Pledge

What's missing here is the notion of statecraft, of mobilising the Treasury and the central bank to forge a new accommodation with investors. Missing too is any intuitive knowledge of voters,