🔗 Share this article

This accusation carries significant weight: that Rachel Reeves has deceived UK citizens, spooking them to accept massive additional taxes which could be funneled into higher welfare payments. However hyperbolic, this is not typical political sparring; on this occasion, the consequences could be damaging. Just last week, detractors aimed at Reeves and Keir Starmer had been labeling their budget "disorderly". Today, it is denounced as falsehoods, with Kemi Badenoch demanding Reeves to step down.

Such a serious charge requires clear responses, therefore let me provide my assessment. Has the chancellor been dishonest? On current evidence, apparently not. There were no whoppers. But, notwithstanding Starmer's yesterday's remarks, that doesn't mean there's nothing to see and we should move on. The Chancellor did mislead the public regarding the considerations informing her decisions. Was it to channel cash towards "benefits street", as the Tories claim? Certainly not, as the numbers prove it.

A Reputation Sustains Another Hit, But Facts Must Win Out

The Chancellor has sustained a further hit to her standing, however, if facts continue to matter in politics, Badenoch should stand down her lynch mob. Maybe the resignation recently of OBR head, Richard Hughes, due to the leak of its own documents will quench Westminster's appetite for scandal.

Yet the real story is far stranger than media reports indicate, extending broader and deeper than the careers of Starmer and his class of '24. Fundamentally, this is an account about how much say the public have over the governance of the nation. And it should worry you.

First, to the Core Details

After the OBR released last Friday some of the forecasts it shared with Reeves as she prepared the budget, the surprise was instant. Not only has the OBR not acted this way before (described as an "exceptional move"), its figures apparently contradicted the chancellor's words. Even as rumors from Westminster were about the grim nature of the budget would have to be, the OBR's own forecasts were getting better.

Take the government's so-called "iron-clad" fiscal rule, that by 2030 daily spending for hospitals, schools, and other services would be wholly funded by taxes: in late October, the watchdog calculated it would just about be met, albeit only by a tiny margin.

A few days later, Reeves gave a media briefing so extraordinary it forced morning television to interrupt its usual fare. Weeks prior to the real budget, the nation was warned: taxes were going up, with the main reason being pessimistic numbers from the OBR, specifically its finding that the UK had become less productive, putting more in but getting less out.

And so! It came to pass. Notwithstanding what Telegraph editorials and Tory media appearances implied over the weekend, that is basically what transpired at the budget, which was significant, harsh, and grim.

The Misleading Alibi

Where Reeves misled us was her justification, because these OBR forecasts did not compel her actions. She might have made other choices; she might have given alternative explanations, even on budget day itself. Prior to last year's election, Starmer pledged exactly such public influence. "The promise of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it's powerlessness that jumps out in Reeves's breakfast speech. The first Labour chancellor in 15 years portrays herself as an apolitical figure at the mercy of forces outside her influence: "Given the circumstances of the long-term challenges on our productivity … any finance minister of any political stripe would be in this position today, confronting the choices that I face."

She certainly make a choice, just not the kind Labour wishes to publicize. Starting April 2029 British workers and businesses will be paying an additional £26bn annually in taxes – but the majority of this will not go towards funding better hospitals, new libraries, or happier lives. Regardless of what bilge comes from Nigel Farage, Badenoch and their allies, it is not getting splashed on "benefits street".

Where the Cash Really Goes

Rather than being spent, over 50% of this additional revenue will in fact provide Reeves cushion for her own fiscal rules. Approximately 25% goes on paying for the administration's U-turns. Examining the OBR's calculations and being as generous as possible to a Labour chancellor, only 17% of the tax take will fund actual new spending, for example abolishing the limit on child benefit. Removing it "will cost" the Treasury a mere £2.5bn, as it had long been an act of political theatre by George Osborne. This administration should have have binned it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform and all of right-wing media have been barking about the idea that Reeves fits the caricature of Labour chancellors, soaking hard workers to fund shirkers. Party MPs have been applauding her budget for being a relief for their social concerns, safeguarding the disadvantaged. Both sides could be 180-degrees wrong: The Chancellor's budget was largely targeted towards asset managers, hedge funds and participants within the financial markets.

Downing Street can make a strong case for itself. The margins provided by the OBR were deemed too small for comfort, particularly given that lenders charge the UK the greatest borrowing cost among G7 developed nations – higher than France, which lost its leader, and exceeding Japan which has way more debt. Combined with our measures to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say this budget enables the Bank of England to cut its key lending rate.

It's understandable why those folk with Labour badges may choose not to couch it in such terms next time they visit #Labourdoorstep. As a consultant for Downing Street puts it, Reeves has effectively "utilised" the bond market to act as a tool of discipline over her own party and the voters. It's why Reeves cannot resign, no matter what promises are broken. It is also why Labour MPs will have to fall into line and vote that cut billions from social security, just as Starmer indicated recently.

A Lack of Statecraft , a Broken Pledge

What's missing here is any sense of strategic governance, of harnessing the Treasury and the Bank to reach a new accommodation with markets. Missing too is innate understanding of voters,