🔗 Share this article

This allegation represents a grave matter: suggesting Rachel Reeves may have misled Britons, scaring them to accept massive extra taxes that would be spent on increased welfare payments. While exaggerated, this isn't typical political sparring; this time, the consequences are more serious. A week ago, critics aimed at Reeves alongside Keir Starmer were labeling their budget "chaotic". Now, it's branded as falsehoods, with Kemi Badenoch demanding Reeves to step down.

Such a serious accusation requires straightforward responses, therefore let me provide my assessment. Did the chancellor tell lies? Based on the available evidence, apparently not. She told no whoppers. However, despite Starmer's recent comments, that doesn't mean there's no issue here and we can all move along. The Chancellor did mislead the public about the considerations informing her decisions. Was this all to channel cash towards "welfare recipients", like the Tories claim? No, as the numbers demonstrate it.

A Standing Takes A Further Blow, But Facts Should Prevail

Reeves has sustained another blow to her reputation, however, if facts continue to have anything to do with politics, Badenoch should stand down her attack dogs. Perhaps the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its internal documents will quench SW1's appetite for scandal.

But the real story is far stranger compared to media reports suggest, and stretches broader and deeper than the political futures of Starmer and his 2024 intake. At its heart, herein lies a story about how much say you and I get over the governance of the nation. And it should worry everyone.

Firstly, on to Brass Tacks

After the OBR published last Friday some of the projections it provided to Reeves as she prepared the red book, the shock was immediate. Not only had the OBR not done such a thing before (an "exceptional move"), its numbers apparently contradicted the chancellor's words. While leaks from Westminster were about the grim nature of the budget was going to be, the OBR's own predictions were getting better.

Take the Treasury's most "unbreakable" fiscal rule, stating by 2030 daily spending on hospitals, schools, and other services must be completely paid for by taxes: at the end of October, the watchdog calculated it would barely be met, albeit by a tiny margin.

Several days later, Reeves gave a press conference so unprecedented it forced breakfast TV to interrupt its usual fare. Several weeks before the real budget, the nation was warned: taxes were going up, and the main reason cited as gloomy numbers from the OBR, in particular its finding that the UK had become less productive, putting more in but yielding less.

And lo! It came to pass. Notwithstanding what Telegraph editorials combined with Tory media appearances suggested over the weekend, this is essentially what happened during the budget, which was big and painful and bleak.

The Misleading Alibi

The way in which Reeves deceived us was her justification, because these OBR forecasts did not compel her actions. She could have chosen other choices; she might have given alternative explanations, even on budget day itself. Before the recent election, Starmer pledged exactly such public influence. "The promise of democracy. The strength of the vote. The potential for national renewal."

One year later, yet it is a lack of agency that jumps out from Reeves's pre-budget speech. The first Labour chancellor in 15 years portrays herself to be a technocrat at the mercy of factors beyond her control: "Given the circumstances of the long-term challenges on our productivity … any chancellor of any party would be in this position today, confronting the choices that I face."

She certainly make decisions, only not the kind the Labour party cares to publicize. From April 2029 British workers as well as businesses are set to be paying another £26bn annually in taxes – but the majority of this will not go towards funding improved healthcare, public services, nor enhanced wellbeing. Regardless of what bilge is spouted by Nigel Farage, Badenoch and others, it is not being lavished upon "welfare claimants".

Where the Money Really Goes

Instead of being spent, more than 50% of the extra cash will instead give Reeves a buffer against her self-imposed fiscal rules. About 25% goes on covering 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 go on genuinely additional spending, for example scrapping the two-child cap on child benefit. Removing it "costs" the Treasury a mere £2.5bn, because it had long been an act of theatrical cruelty from George Osborne. This administration should have abolished it in its first 100 days.

The Real Target: Financial Institutions

Conservatives, Reform and all of Blue Pravda have been railing against the idea that Reeves fits the stereotype of Labour chancellors, taxing hard workers to spend on the workshy. Party MPs are applauding her budget for being balm to their social concerns, protecting the most vulnerable. Both sides could be completely mistaken: The Chancellor's budget was largely aimed at asset managers, hedge funds and the others in the financial markets.

Downing Street could present a strong case in its defence. The margins from the OBR were too small for comfort, particularly considering lenders charge the UK the greatest borrowing cost among G7 developed nations – higher than France, which lost a prime minister, and exceeding Japan which has far greater debt. Coupled with our policies to cap fuel bills, prescription charges as well as train fares, Starmer together with Reeves can say their plan allows the central bank to reduce its key lending rate.

You can see why those folk with Labour badges may choose not to frame it this way next time they're on the doorstep. According to one independent adviser to Downing Street says, Reeves has effectively "utilised" the bond market to act as an instrument of control against Labour MPs and the voters. This is the reason Reeves cannot resign, no matter what promises she breaks. It's the reason Labour MPs will have to knuckle down and support measures that cut billions from social security, as Starmer indicated yesterday.

A Lack of Political Vision and a Broken Pledge

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