🔗 Share this article

The charge represents a grave matter: that Rachel Reeves has misled the British public, frightening them to accept massive additional taxes which could be spent on increased benefits. However exaggerated, this isn't usual political sparring; on this occasion, the consequences are higher. Just last week, detractors aimed at Reeves alongside Keir Starmer were labeling their budget "disorderly". Today, it is denounced as falsehoods, with Kemi Badenoch demanding the chancellor's resignation.

Such a grave accusation requires clear answers, therefore let me provide my view. Did the chancellor tell lies? Based on the available information, apparently not. She told no major untruths. However, notwithstanding Starmer's yesterday's comments, it doesn't follow that there is nothing to see and we can all move along. 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? No, as the numbers prove it.

A Standing Sustains Another Blow, But Facts Must Win Out

The Chancellor has taken a further hit to her standing, however, if facts continue to matter in politics, Badenoch should stand down her attack dogs. Maybe the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the unauthorized release of its internal documents will satisfy Westminster's appetite for scandal.

But the true narrative is far stranger than the headlines suggest, extending broader and deeper than the political futures of Starmer and the 2024 intake. At its heart, this is an account concerning how much say the public get in the governance of the nation. This should should worry you.

Firstly, to the Core Details

After the OBR published last Friday some of the projections it provided to Reeves while she prepared the budget, the shock was immediate. Not merely has the OBR not acted this way before (an "exceptional move"), its figures seemingly went against Reeves's statements. Even as rumors from Westminster were about how bleak the budget would have to be, the OBR's own predictions were improving.

Take the government's so-called "iron-clad" rule, stating by 2030 day-to-day spending for hospitals, schools, and the rest would be completely paid for by taxes: at the end of October, the watchdog reckoned this would barely be met, albeit only by a minuscule margin.

A few days later, Reeves held a press conference so extraordinary it forced morning television to interrupt its regular schedule. Several weeks prior to the real budget, the nation was put on alert: taxes would rise, and the main reason being pessimistic numbers from the OBR, specifically its finding suggesting the UK had become less productive, putting more in but yielding less.

And lo! It came to pass. Notwithstanding the implications from Telegraph editorials and Tory broadcast rounds implied over the weekend, this is basically what happened at the budget, which was significant, harsh, and grim.

The Misleading Alibi

Where Reeves misled us concerned her justification, since these OBR forecasts didn't compel her actions. She could have made different options; she could have given alternative explanations, including on budget day itself. Prior to last year's election, Starmer pledged precisely this kind of public influence. "The hope of democracy. The strength of the vote. The possibility for national renewal."

A year on, and it's powerlessness that jumps out from Reeves's breakfast speech. Our first Labour chancellor for a decade and a half casts herself to be a technocrat buffeted by factors outside her influence: "Given the circumstances of the persistent challenges on our productivity … any chancellor of any party would be standing here today, facing the decisions that I face."

She did make decisions, only not the kind the Labour party cares to broadcast. Starting April 2029 British workers and businesses will be paying another £26bn annually in tax – but most of that will not be spent on improved healthcare, public services, or enhanced wellbeing. Whatever bilge is spouted by Nigel Farage, Badenoch and others, it is not getting splashed on "benefits street".

Where the Cash Really Goes

Instead of being spent, more than 50% of this additional revenue will in fact provide Reeves a buffer for her self-imposed fiscal rules. Approximately 25% is allocated to paying for the administration's 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 "will cost" the Treasury only £2.5bn, as it was always a bit of political theatre by George Osborne. This administration could and should have binned it immediately upon taking office.

The Real Target: The Bond Markets

The Tories, Reform and the entire Blue Pravda have been barking about how Reeves conforms to the stereotype of left-wing finance ministers, taxing hard workers to spend on shirkers. Party MPs are applauding her budget for being balm for their social concerns, protecting the most vulnerable. Each group could be 180-degrees wrong: The Chancellor's budget was largely targeted towards asset managers, speculative capital and the others in the financial markets.

The government can make a compelling argument in its defence. The forecasts from the OBR were deemed too small to feel secure, particularly considering lenders charge the UK the highest interest rate of all G7 developed nations – exceeding that of France, that recently lost a prime minister, and exceeding Japan that carries way more debt. Coupled with the measures to hold down fuel bills, prescription charges and train fares, Starmer and Reeves argue their plan allows the Bank of England to cut interest rates.

You can see that those wearing Labour badges might not couch it this way when they're on #Labourdoorstep. As one independent adviser to Downing Street puts it, Reeves has "weaponised" the bond market as a tool of discipline over Labour MPs and the voters. It's why Reeves cannot resign, regardless of which promises are broken. It's why Labour MPs must knuckle down and support measures to take billions off social security, as Starmer promised yesterday.

Missing Statecraft , a Broken Pledge

What's missing from this is any sense of statecraft, of mobilising the Treasury and the Bank to reach a fresh understanding with investors. Missing too is any intuitive knowledge of voters,