🔗 Share this article

This charge carries significant weight: that Rachel Reeves may have lied to the British public, spooking them to accept massive extra taxes which could be funneled into increased benefits. While hyperbolic, this is not usual political sparring; on this occasion, the consequences are more serious. Just last week, critics of Reeves and Keir Starmer had been labeling their budget "a shambles". Today, it is branded as lies, and Kemi Badenoch demanding the chancellor's resignation.

Such a serious accusation requires straightforward answers, so let me provide my assessment. Did the chancellor lied? Based on the available information, apparently not. There were no whoppers. However, notwithstanding Starmer's recent remarks, it doesn't follow that there is no issue here and we should move on. The Chancellor did misinform the public regarding the factors shaping her decisions. Was this all to channel cash to "benefits street", like the Tories assert? Certainly not, and the figures prove it.

A Standing Sustains A Further Blow, But Facts Should Win Out

The Chancellor has taken another hit to her standing, however, if facts still matter in politics, Badenoch should call off her attack dogs. Maybe the resignation recently of OBR head, Richard Hughes, over the unauthorized release of its internal documents will satisfy SW1's appetite for scandal.

Yet the real story is far stranger compared to media reports indicate, extending broader and deeper beyond the political futures of Starmer and the 2024 intake. Fundamentally, this is an account concerning how much say the public have over the governance of our own country. And it should worry everyone.

First, to the Core Details

After the OBR released recently a portion of the forecasts it shared with Reeves while she wrote the red book, the shock was immediate. Not merely has the OBR not done such a thing before (an "rare action"), its figures seemingly contradicted Reeves's statements. Even as rumors from Westminster were about how bleak the budget would have to be, the watchdog's forecasts were improving.

Consider the government's most "iron-clad" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and the rest would be wholly paid for by taxes: at the end of October, the watchdog reckoned it would just about be met, albeit only by a tiny margin.

Several days later, Reeves gave a media briefing so unprecedented it forced morning television to break from its usual fare. Weeks prior to the actual budget, the country was put on alert: taxes would rise, and the main reason cited as gloomy numbers provided by the OBR, specifically its finding that the UK was less productive, putting more in but getting less out.

And so! It came to pass. Notwithstanding what Telegraph editorials and Tory broadcast rounds suggested recently, this is basically what transpired at the budget, which was big and painful and bleak.

The Misleading Justification

The way in which Reeves misled us was her justification, because these OBR forecasts didn't compel her actions. She could have chosen different options; she could have given alternative explanations, even during the statement. Before last year's election, Starmer promised precisely this kind of people power. "The hope of democracy. The power of the vote. The potential for national renewal."

A year on, yet it's powerlessness that is evident from Reeves's pre-budget speech. Our first Labour chancellor in 15 years portrays herself to be a technocrat at the mercy of forces beyond her control: "In the context of the long-term challenges with our productivity … any chancellor of any political stripe would be standing here today, confronting the choices that I face."

She certainly make decisions, only not one the Labour party wishes to broadcast. From April 2029 British workers as well as businesses will be paying another £26bn annually in taxes – but most of that will not be funding improved healthcare, public services, or happier lives. Regardless of what bilge is spouted by Nigel Farage, Badenoch and others, it is not being lavished upon "benefits street".

Where the Money Actually Ends Up

Instead of going on services, more than 50% of the extra cash will in fact give Reeves cushion for her own fiscal rules. Approximately 25% goes on covering the administration's policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards Reeves, only 17% of the taxes will go on actual new spending, such as abolishing the limit on child benefit. Removing it "will cost" the Treasury a mere £2.5bn, because it was always an act of political theatre from George Osborne. A Labour government should have abolished it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform along with all of Blue Pravda have been railing against how Reeves conforms to the caricature of Labour chancellors, soaking hard workers to fund shirkers. Labour backbenchers are cheering her budget for being a relief for their troubled consciences, protecting the disadvantaged. Both sides could be completely mistaken: The Chancellor's budget was primarily aimed at investment funds, hedge funds and the others in the financial markets.

Downing Street could present a strong case for itself. The forecasts provided by the OBR were too small to feel secure, particularly considering lenders demand from the UK the highest interest rate of all G7 developed nations – exceeding that of France, that recently lost a prime minister, and exceeding Japan which has way more debt. Coupled with our policies to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say their plan enables the central bank to cut its key lending rate.

You can see why those folk with red rosettes might not couch it this way when they're on #Labourdoorstep. According to one independent adviser to Downing Street says, Reeves has "weaponised" the bond market to act as a tool of discipline over Labour MPs and the electorate. It's why Reeves can't resign, regardless of which promises she breaks. It's the reason Labour MPs must knuckle down and support measures to take billions off social security, just as Starmer promised yesterday.

A Lack of Political Vision and an Unfulfilled Promise

What's missing from this is any sense of strategic governance, of mobilising the finance ministry and the central bank to reach a fresh understanding with markets. Also absent is innate understanding of voters,