🔗 Share this article

The accusation is a serious one: that Rachel Reeves has misled the British public, frightening them into accepting billions in additional taxes that could be used for increased benefits. However exaggerated, this isn't typical political bickering; on this occasion, the stakes are more serious. Just last week, critics of Reeves alongside Keir Starmer had been calling their budget "a shambles". Today, it is denounced as falsehoods, with Kemi Badenoch demanding the chancellor's resignation.

This grave accusation requires straightforward responses, therefore here is my view. Did the chancellor tell lies? On current evidence, apparently not. There were no blatant falsehoods. But, despite Starmer's yesterday's comments, it doesn't follow that there is no issue here and we can all move along. Reeves did misinform the public about the considerations shaping her decisions. Was this all to funnel cash towards "welfare recipients", like the Tories assert? No, and the numbers demonstrate this.

A Standing Sustains Another Blow, Yet Truth Must Prevail

Reeves 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 resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the unauthorized release of its internal documents will quench Westminster's thirst for blood.

Yet the true narrative is far stranger than the headlines indicate, extending broader and deeper beyond the careers of Starmer and his class of '24. At its heart, herein lies an account about what degree of influence the public get over the running of our own country. And it should worry you.

Firstly, to the Core Details

After the OBR released recently a portion of the forecasts it provided to Reeves as she prepared the budget, the shock was immediate. Not merely has the OBR never done such a thing before (an "exceptional move"), its numbers seemingly went against the chancellor's words. Even as leaks from Westminster suggested the grim nature of the budget would have to be, the OBR's own forecasts were improving.

Consider the Treasury's so-called "iron-clad" rule, that by 2030 day-to-day spending for hospitals, schools, and the rest would be completely funded by taxes: at the end of October, the watchdog calculated this would barely be met, albeit by a tiny margin.

A few days later, Reeves gave a media briefing so extraordinary it forced breakfast TV to break from its regular schedule. Weeks before the real budget, the country was put on alert: taxes were going up, and the primary cause cited as pessimistic numbers from the OBR, in particular its conclusion that the UK was less productive, investing more but yielding less.

And so! It happened. Notwithstanding what Telegraph editorials and Tory media appearances suggested over the weekend, this is basically what happened during the budget, that proved to be big and painful and bleak.

The Deceptive Alibi

Where Reeves misled us concerned her alibi, since those OBR forecasts did not force her hand. She could have made other choices; she could have given other reasons, even during the statement. Before the recent election, Starmer pledged exactly such public influence. "The hope of democracy. The power of the vote. The potential for national renewal."

One year later, yet it's a lack of agency that is evident in Reeves's breakfast speech. The first Labour chancellor in 15 years portrays herself as an apolitical figure buffeted by forces beyond her control: "Given the circumstances of the persistent challenges with our productivity … any chancellor of any political stripe would be in this position today, confronting the choices that I face."

She did make a choice, just not the kind the Labour party wishes to publicize. From April 2029 UK workers as well as businesses will be paying another £26bn a year in taxes – but the majority of this will not go towards funding improved healthcare, public services, nor happier lives. Whatever bilge comes from Nigel Farage, Badenoch and their allies, it is not getting splashed on "benefits street".

Where the Money Really Goes

Instead of being spent, over 50% of the extra cash will in fact give Reeves cushion for her self-imposed budgetary constraints. About 25% goes on covering the government's own U-turns. Reviewing the watchdog's figures and giving maximum benefit of the doubt towards Reeves, a mere 17% of the tax take will fund genuinely additional spending, such as scrapping the two-child cap on child benefit. Removing it "costs" the Treasury a mere £2.5bn, as it had long been an act of theatrical cruelty from George Osborne. This administration should have abolished it in its first 100 days.

The True Audience: Financial Institutions

Conservatives, Reform and the entire Blue Pravda have spent days barking about the idea that Reeves conforms to the caricature of Labour chancellors, soaking strivers to fund shirkers. Party MPs have been applauding her budget as a relief for their social concerns, protecting the disadvantaged. Each group could be 180-degrees wrong: The Chancellor's budget was largely aimed at investment funds, speculative capital and participants within the financial markets.

The government can make a strong case in its defence. The margins from the OBR were too small to feel secure, particularly given that lenders demand from the UK the highest interest rate of all G7 developed nations – higher than France, that recently lost its leader, higher than Japan that carries way more debt. Combined with the measures to hold down fuel bills, prescription charges and train fares, Starmer and Reeves argue this budget allows the Bank of England to reduce its key lending rate.

You can see that those wearing Labour badges might not couch it in such terms next time they're on the doorstep. As one independent adviser to Downing Street says, Reeves has effectively "utilised" financial markets to act as an instrument of control over her own party and the voters. It's the reason the chancellor can't resign, no matter what promises she breaks. It is also the reason Labour MPs will have to knuckle down and vote to take billions off social security, as Starmer indicated yesterday.

A Lack of Political Vision , a Broken Pledge

What's missing from this is the notion of statecraft, of harnessing the finance ministry and the central bank to reach a new accommodation with investors. Missing too is innate understanding of voters,