🔗 Share this article

The allegation carries significant weight: suggesting Rachel Reeves may have deceived UK citizens, frightening them into accepting billions in extra taxes which would be spent on increased benefits. However exaggerated, this is not usual political sparring; on this occasion, the stakes could be damaging. A week ago, detractors of Reeves alongside Keir Starmer were calling their budget "a shambles". Now, it is branded as falsehoods, with Kemi Badenoch calling for the chancellor's resignation.

Such a serious charge requires straightforward responses, therefore let me provide my view. Has the chancellor tell lies? On current evidence, apparently not. There were no blatant falsehoods. However, despite Starmer's recent comments, that doesn't mean there's no issue here and we should move on. Reeves did mislead the public about the considerations shaping her decisions. Was it to funnel cash towards "welfare recipients", as the Tories claim? No, as the figures prove this.

A Standing Sustains Another Blow, But Facts Must Win Out

Reeves has sustained a further blow to her standing, however, if facts still have anything to do with politics, Badenoch ought to call off her attack dogs. Maybe the stepping down recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will satisfy SW1's appetite for scandal.

Yet the real story is far stranger compared to the headlines suggest, and stretches broader and deeper beyond the careers of Starmer and the 2024 intake. At its heart, this is a story about how much say the public get in the governance of the nation. This should concern everyone.

First, to the Core Details

After the OBR released last Friday a portion of the forecasts it provided to Reeves as she wrote the budget, the surprise was immediate. Not only had the OBR never acted this way before (an "rare action"), its figures apparently contradicted the chancellor's words. Even as leaks from Westminster suggested how bleak the budget was going to be, the OBR's own forecasts were getting better.

Take the Treasury's most "unbreakable" fiscal rule, stating by 2030 day-to-day spending on hospitals, schools, and other services would be completely funded by taxes: at the end of October, the watchdog calculated this would barely be met, albeit by a minuscule margin.

Several days later, Reeves held a media briefing so unprecedented it forced morning television to break from its usual fare. Weeks prior to the real budget, the country was warned: taxes were going up, and the primary cause being pessimistic numbers provided by the OBR, in particular its conclusion that the UK had become less productive, putting more in but yielding less.

And so! It happened. Despite what Telegraph editorials combined with Tory media appearances implied recently, this is essentially what transpired at the budget, that proved to be big and painful and bleak.

The Misleading Alibi

Where Reeves misled us was her justification, because these OBR forecasts did not compel her actions. She might have made different options; she might have given other reasons, including during the statement. Prior to last year's election, Starmer pledged exactly such public influence. "The hope of democracy. The power of the vote. The possibility for national renewal."

One year later, yet it's powerlessness that jumps out in Reeves's breakfast speech. Our first Labour chancellor for a decade and a half portrays herself to be an apolitical figure at the mercy of forces beyond her control: "In the context of the persistent challenges on our productivity … any finance minister of any political stripe would be standing here today, confronting the decisions that I face."

She did make a choice, only not the kind the Labour party wishes to publicize. From April 2029 UK workers as well as businesses are set to be paying an additional £26bn a year in taxes – but the majority of this will not be spent on improved healthcare, public services, or enhanced wellbeing. Regardless of what bilge is spouted by Nigel Farage, Badenoch and others, it is not being lavished upon "welfare claimants".

Where the Cash Really Goes

Instead of going on services, more than 50% of the additional revenue will instead provide Reeves cushion for her own fiscal rules. About 25% is allocated to paying for the administration's policy reversals. Examining the OBR's calculations and giving maximum benefit of the doubt to a Labour chancellor, a mere 17% of the taxes will go on genuinely additional spending, for example abolishing the two-child cap on child benefit. Removing it "will cost" the Treasury only £2.5bn, because it was always an act of theatrical cruelty by George Osborne. This administration could and should have binned it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform and all of right-wing media have spent days barking about the idea that Reeves conforms to the stereotype of Labour chancellors, taxing hard workers to fund the workshy. Party MPs are applauding her budget for being a relief to their social concerns, protecting the most vulnerable. Each group are completely mistaken: Reeves's budget was primarily targeted towards investment funds, hedge funds and the others in the financial markets.

The government could present a compelling argument for itself. The forecasts provided by the OBR were too small to feel secure, particularly considering lenders charge the UK the highest interest rate among G7 rich countries – higher than France, that recently lost its leader, and exceeding Japan which has far greater debt. Coupled with our policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves argue their plan allows the central bank to cut its key lending rate.

You can see that those folk with red rosettes might not frame it in such terms next time they visit #Labourdoorstep. According to a consultant to Downing Street puts it, Reeves has effectively "utilised" the bond market as a tool of discipline against her own party and the electorate. This is why the chancellor cannot resign, regardless of which promises she breaks. It is also the reason Labour MPs must knuckle down and support measures to take billions off social security, just as Starmer promised yesterday.

Missing Political Vision and an Unfulfilled Pledge

What is absent from this is any sense of strategic governance, of harnessing the finance ministry and the Bank to reach a fresh understanding with investors. Also absent is intuitive knowledge of voters,