🔗 Share this article

This accusation represents a grave matter: suggesting Rachel Reeves has lied to Britons, scaring them into accepting billions in extra taxes that would be funneled into higher benefits. However hyperbolic, this isn't typical Westminster bickering; this time, the stakes could be damaging. A week ago, critics aimed at Reeves and Keir Starmer had been labeling their budget "chaotic". Today, it's denounced as lies, and Kemi Badenoch calling for the chancellor to quit.

Such a serious charge demands clear responses, so here is my assessment. Did the chancellor tell lies? Based on the available evidence, apparently not. She told no major untruths. However, despite Starmer's yesterday's comments, that doesn't mean there's no issue here and we should move on. The Chancellor did mislead the public regarding the factors shaping her choices. Was this all to channel cash to "welfare recipients", like the Tories assert? Certainly not, and the numbers demonstrate this.

A Standing Sustains A Further Hit, But Facts Must Win Out

The Chancellor has sustained another blow to her reputation, however, if facts continue to matter in 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 unauthorized release of its internal documents will quench Westminster's appetite for scandal.

But the true narrative is far stranger compared to media reports indicate, and stretches wider and further beyond the careers of Starmer and his class of '24. At its heart, herein lies an account about how much say you and I get over the running of the nation. And it should worry you.

Firstly, to Brass Tacks

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 never acted this way before (an "unusual step"), its figures seemingly contradicted Reeves's statements. While rumors from Westminster suggested how bleak the budget would have to be, the watchdog's forecasts were improving.

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

Several days later, Reeves held a press conference so unprecedented it forced morning television to break from its usual fare. Several weeks before the actual budget, the nation was warned: taxes would rise, with the primary cause cited as gloomy numbers from the OBR, specifically its finding suggesting the UK had become less efficient, putting more in but getting less out.

And lo! It came to pass. Notwithstanding what Telegraph editorials and Tory media appearances suggested recently, this is basically what transpired during the budget, that proved to be big and painful and bleak.

The Deceptive Alibi

The way in which Reeves deceived us was her alibi, because those OBR forecasts did not force her hand. She could have chosen other choices; she might have given alternative explanations, including during the statement. Before last year's election, Starmer pledged exactly such people power. "The promise of democracy. The strength of the vote. The possibility for national renewal."

One year later, and it's powerlessness that jumps out from Reeves's breakfast speech. Our first Labour chancellor in 15 years casts herself as an apolitical figure at the mercy of factors beyond her control: "In the context of the long-term challenges on our productivity … any finance minister of any political stripe would be standing here today, facing the decisions that I face."

She did make a choice, only not the kind Labour wishes to publicize. From April 2029 British workers and businesses are set to be paying another £26bn annually in taxes – and the majority of this will not be funding improved healthcare, public services, nor enhanced wellbeing. Whatever bilge is spouted by Nigel Farage, Badenoch and others, it is not getting splashed on "benefits street".

Where the Money Really Goes

Instead of being spent, more than 50% of the additional revenue will in fact provide Reeves cushion for her self-imposed fiscal rules. Approximately 25% goes on paying for the government's own U-turns. Examining the watchdog's figures and being as generous as possible towards Reeves, a mere 17% of the tax take will go on actual new spending, for example abolishing the two-child cap on child benefit. Its abolition "costs" the Treasury only £2.5bn, as it was always an act of political theatre from George Osborne. A Labour government could and should have binned it immediately upon taking office.

The True Audience: The Bond Markets

The Tories, Reform along with the entire Blue Pravda have spent days barking about the idea that Reeves conforms to the stereotype of Labour chancellors, soaking strivers to spend on the workshy. Labour backbenchers have been applauding her budget as balm to their social concerns, protecting the most vulnerable. Each group are 180-degrees wrong: The Chancellor's budget was largely targeted towards investment funds, speculative capital and the others in the bond markets.

Downing Street can make a compelling argument for itself. The margins provided by the OBR were insufficient to feel secure, particularly considering bond investors charge the UK the highest interest rate of all G7 rich countries – higher than France, that recently lost its leader, and exceeding Japan which has far greater debt. Coupled with the policies to cap fuel bills, prescription charges and train fares, Starmer together with Reeves argue this budget enables the central bank to reduce interest rates.

You can see that those folk with red rosettes might not couch it in such terms when they visit the doorstep. According to a consultant to Downing Street says, Reeves has "weaponised" the bond market as an instrument of discipline against Labour MPs and the voters. This is the reason the chancellor cannot resign, no matter what promises are broken. It is also why Labour MPs must knuckle down and vote to take billions off social security, just as Starmer indicated yesterday.

Missing Statecraft , an Unfulfilled Pledge

What's missing from this is any sense of statecraft, of harnessing the finance ministry and the Bank to reach a new accommodation with markets. Also absent is any intuitive knowledge of voters,