🔗 Share this article

This charge carries significant weight: suggesting Rachel Reeves may have misled Britons, spooking them to accept massive additional taxes which would be used for increased benefits. While exaggerated, this is not usual political bickering; this time, the consequences could be damaging. Just last week, detractors aimed at Reeves and Keir Starmer had been calling their budget "chaotic". Now, it's denounced as falsehoods, and Kemi Badenoch calling for Reeves to step down.

Such a grave accusation requires straightforward answers, therefore here is my assessment. Has the chancellor lied? Based on current information, apparently not. There were no whoppers. But, despite Starmer's recent remarks, it doesn't follow that there is nothing to see and we should move on. Reeves did mislead the public about the factors informing her decisions. Was it to funnel cash to "benefits street", like the Tories assert? No, and the numbers prove it.

A Reputation Takes Another Blow, But Facts Must Win Out

Reeves has taken a further blow to her standing, however, should facts continue to have anything to do with politics, Badenoch should call off her lynch mob. Maybe the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its internal documents will quench SW1's thirst for blood.

Yet the real story is far stranger compared to media reports indicate, extending wider and further than the political futures of Starmer and the 2024 intake. Fundamentally, this is a story concerning what degree of influence the public have in the governance of the nation. And it should worry you.

Firstly, to the Core Details

After the OBR released last Friday a portion of the projections it shared with Reeves as she prepared the red book, the shock was immediate. Not merely had the OBR not done such a thing before (an "unusual step"), its numbers apparently contradicted Reeves's statements. While leaks from Westminster suggested the grim nature of the budget would have to be, the watchdog's predictions were getting better.

Take the Treasury's most "iron-clad" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and other services must be completely funded by taxes: at the end of October, the watchdog calculated this would just about be met, albeit only by a tiny margin.

A few days later, Reeves held a press conference so extraordinary it forced morning television to break from its regular schedule. Weeks prior to the real budget, the nation was warned: taxes were going up, and the primary cause being gloomy numbers provided by the OBR, specifically its finding that the UK was less efficient, putting more in but getting less out.

And lo! It happened. Notwithstanding what Telegraph editorials and Tory broadcast rounds implied over the weekend, that is essentially what transpired at the budget, which was big and painful and bleak.

The Deceptive Alibi

Where Reeves deceived us was her justification, because those OBR forecasts did not force her hand. She might have chosen different options; she could have given alternative explanations, even on budget day itself. Prior to the recent election, Starmer pledged exactly such people power. "The promise of democracy. The power of the vote. The potential for national renewal."

One year later, and it's a lack of agency 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 factors outside her influence: "In the context of the persistent challenges with our productivity … any chancellor of any party would be in this position today, facing the choices that I face."

She did make a choice, just not one Labour wishes to publicize. From April 2029 British workers as well as businesses are set to be paying an additional £26bn a year in tax – and the majority of this will not be spent on better hospitals, public services, nor enhanced wellbeing. Whatever bilge comes from Nigel Farage, Badenoch and others, it is not being lavished upon "benefits street".

Where the Money Actually Ends Up

Instead of being spent, more than 50% of this extra cash will in fact give Reeves a buffer for her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the government's own policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards Reeves, only 17% of the tax take will go on actual new spending, such as abolishing the two-child cap on child benefit. Its abolition "will cost" the Treasury only £2.5bn, as it had long been an act of political theatre from George Osborne. A Labour government could and should abolished it immediately upon taking office.

The True Audience: Financial Institutions

Conservatives, Reform and the entire right-wing media have spent days barking about the idea that Reeves fits the stereotype of Labour chancellors, taxing strivers to spend on the workshy. Labour backbenchers have been applauding her budget for being balm to their troubled consciences, safeguarding the most vulnerable. Each group are completely mistaken: Reeves's budget was primarily targeted towards asset managers, hedge funds and the others in the financial markets.

The government can make a compelling argument for itself. The margins from the OBR were insufficient to feel secure, particularly given that lenders charge the UK the greatest borrowing cost of all G7 rich countries – higher than France, that recently lost its leader, and exceeding Japan which has way more debt. Coupled 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 cut interest rates.

It's understandable why those folk with red rosettes might not frame it in such terms next time they're on #Labourdoorstep. According to one independent adviser for Downing Street puts it, Reeves has "weaponised" the bond market as a tool of discipline over Labour MPs and the voters. It's why 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 Political Vision , an Unfulfilled Promise

What's missing here is the notion of strategic governance, of mobilising the finance ministry and the central bank to forge a fresh understanding with investors. Also absent is any innate understanding of voters,