🔗 Share this article

The allegation carries significant weight: suggesting Rachel Reeves may have deceived Britons, scaring them into accepting billions in extra taxes which would be spent on higher benefits. While exaggerated, this is not typical political sparring; on this occasion, the consequences are higher. Just last week, critics of Reeves alongside Keir Starmer had been calling their budget "uncoordinated". Today, it is branded as lies, with Kemi Badenoch demanding the chancellor's resignation.

This serious charge demands straightforward responses, therefore let me provide my assessment. Has the chancellor been dishonest? Based on the available information, no. There were no blatant falsehoods. However, notwithstanding Starmer's recent comments, it doesn't follow that there's no issue here and we can all move along. Reeves did misinform the public regarding the factors shaping her choices. Was it to channel cash to "benefits street", as the Tories claim? Certainly not, as the numbers demonstrate it.

A Standing Takes Another Blow, Yet Truth Must Prevail

The Chancellor has sustained another blow to her reputation, however, should facts still have anything to do with politics, Badenoch should call off her attack dogs. Maybe the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the unauthorized release of its internal documents will quench SW1's appetite for scandal.

But the real story is far stranger than the headlines indicate, extending wider and further beyond the political futures of Starmer and his class of '24. At its heart, this is a story concerning what degree of influence you and I have over the running of the nation. And it concern everyone.

First, on to the Core Details

When the OBR published last Friday a portion of the projections it shared with Reeves as she wrote the red book, the surprise was immediate. Not merely has the OBR never done such a thing before (an "exceptional move"), its figures seemingly went against Reeves's statements. Even as leaks from Westminster were about the grim nature of the budget was going to be, the OBR's own predictions were improving.

Take the Treasury's so-called "iron-clad" fiscal rule, stating by 2030 daily spending on hospitals, schools, and the rest would be wholly paid for by taxes: in late October, the OBR calculated it would barely be met, albeit only by a tiny margin.

Several days later, Reeves held a press conference so extraordinary it forced morning television to break from its usual fare. Several weeks before the actual budget, the nation was warned: taxes would rise, and the main reason cited as gloomy numbers provided by the OBR, specifically its conclusion that the UK was less efficient, putting more in but yielding less.

And so! It came to pass. Notwithstanding the implications from Telegraph editorials and Tory broadcast rounds suggested over the weekend, this is basically what transpired during the budget, that proved to be big and painful and bleak.

The Misleading Justification

Where Reeves misled us was her justification, because these OBR forecasts didn't force her hand. She could have chosen other choices; she could have provided alternative explanations, even during the statement. Before the recent election, Starmer pledged exactly such public influence. "The promise of democracy. The strength of the vote. The possibility for national renewal."

One year later, and it is powerlessness that is evident in Reeves's pre-budget speech. The first Labour chancellor for a decade and a half casts herself to be an apolitical figure buffeted by factors outside her influence: "Given the circumstances of the long-term challenges on our productivity … any chancellor of any political stripe would be in this position today, confronting the choices that I face."

She certainly make a choice, only not one Labour cares to publicize. From April 2029 British workers and businesses will be paying another £26bn a year in taxes – and the majority of this will not go towards funding better hospitals, public services, or enhanced wellbeing. Regardless of what nonsense comes from Nigel Farage, Badenoch and their allies, it isn't being lavished upon "benefits street".

Where the Money Actually Ends Up

Instead of being spent, more than 50% of this extra cash will instead provide Reeves cushion for her own budgetary constraints. Approximately 25% goes on paying for the administration's U-turns. Examining the watchdog's figures and giving maximum benefit of the doubt towards Reeves, only 17% of the taxes will fund actual new spending, such as abolishing the two-child cap on child benefit. Removing it "costs" the Treasury only £2.5bn, because it had long been a bit of theatrical cruelty from George Osborne. A Labour government could and should abolished it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform and the entire right-wing media have spent days barking about how Reeves fits the stereotype of Labour chancellors, soaking strivers to fund the workshy. Labour backbenchers have been cheering her budget as balm to their social concerns, protecting the disadvantaged. Each group could be completely mistaken: Reeves's budget was largely targeted towards asset managers, speculative capital and the others in the bond markets.

The government could present a compelling argument in its defence. The margins provided by the OBR were deemed insufficient to feel secure, especially considering lenders demand from the UK the highest interest rate of all G7 rich countries – exceeding that of France, that recently lost a prime minister, higher than Japan that carries way more debt. Combined with our policies to cap fuel bills, prescription charges and train fares, Starmer and Reeves argue their plan allows the central bank to reduce its key lending rate.

It's understandable that those folk with Labour badges might not couch it in such terms when they're on the doorstep. As one independent adviser to Downing Street says, Reeves has "utilised" the bond market as a tool of control over her own party and the electorate. This is the reason the chancellor cannot resign, regardless of which pledges she breaks. It is also the reason Labour MPs will have to fall into line and vote to take billions off social security, just as Starmer promised yesterday.

A Lack of Political Vision , a Broken Promise

What's missing here is any sense of strategic governance, of harnessing the finance ministry and the central bank to forge a new accommodation with markets. Missing too is any intuitive knowledge of voters,