🔗 Share this article

The allegation carries significant weight: suggesting Rachel Reeves has deceived Britons, frightening them to accept massive extra taxes which could be funneled into increased welfare payments. However exaggerated, this is not usual political sparring; this time, the consequences could be damaging. A week ago, critics aimed at Reeves alongside Keir Starmer were calling their budget "a shambles". Now, it is branded as falsehoods, and Kemi Badenoch demanding the chancellor to quit.

This grave accusation requires clear responses, so let me provide my assessment. Has the chancellor been dishonest? On the available information, apparently not. She told no major untruths. But, despite Starmer's yesterday's comments, that doesn't mean there is no issue here and we should move on. Reeves did mislead the public regarding the considerations shaping her decisions. Was this all to funnel cash towards "benefits street", like the Tories claim? No, and the numbers demonstrate it.

A Reputation Sustains A Further Hit, But Facts Should Win Out

Reeves has sustained another hit to her standing, but, if facts still matter in politics, Badenoch should stand down her lynch mob. Perhaps the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the leak of its internal documents will satisfy SW1's thirst for blood.

Yet the real story is much more unusual compared to the headlines indicate, extending wider and further beyond the careers of Starmer and the 2024 intake. At its heart, herein lies a story concerning what degree of influence you and I have in the governance of the nation. This should should worry you.

First, on to Brass Tacks

After the OBR published recently some of the projections it shared with Reeves while she wrote the red book, the shock was instant. Not only had the OBR never done such a thing before (described as an "unusual step"), its numbers apparently went against Reeves's statements. While leaks from Westminster suggested the grim nature of the budget was going to be, the watchdog's predictions were getting better.

Consider the government's most "unbreakable" rule, that by 2030 daily spending for hospitals, schools, and other services would be completely funded by taxes: in late October, the OBR calculated this would barely be met, albeit only by a tiny margin.

Several days later, Reeves held a press conference so extraordinary that it caused breakfast TV to interrupt its regular schedule. Weeks before the actual budget, the country was warned: taxes would rise, with the primary cause cited as gloomy numbers provided by the OBR, specifically its finding suggesting the UK was less efficient, investing more but yielding less.

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

The Deceptive Alibi

The way in which Reeves deceived us was her justification, since those OBR forecasts did not compel her actions. She could have made different options; she might have given alternative explanations, including on budget day itself. Prior to the recent election, Starmer promised precisely this kind of public influence. "The promise of democracy. The strength of the vote. The potential for national renewal."

One year later, and it is a lack of agency that is evident from Reeves's pre-budget speech. The 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 long-term challenges on our productivity … any finance minister of any political stripe would be in this position today, confronting the decisions that I face."

She certainly make decisions, just not one Labour cares to broadcast. Starting April 2029 British workers and businesses will be paying an additional £26bn a year in tax – and most of that will not be spent on improved healthcare, public services, or happier lives. Regardless of what bilge comes from Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Money Really Goes

Rather than being spent, over 50% of this extra cash will in fact give Reeves cushion for her self-imposed fiscal rules. About 25% is allocated to paying for the administration's U-turns. Examining the OBR's calculations and being as generous as possible towards a Labour chancellor, a mere 17% of the taxes will go on actual new spending, for example scrapping the limit on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, as it was always a bit of political theatre from George Osborne. This administration should have abolished it in its first 100 days.

The True Audience: Financial Institutions

The Tories, Reform along with the entire right-wing media have spent days railing against how Reeves conforms to the caricature of left-wing finance ministers, soaking strivers to fund shirkers. Party MPs have been cheering her budget for being a relief to their troubled consciences, safeguarding the most vulnerable. Both sides are completely mistaken: Reeves's budget was primarily aimed at asset managers, speculative capital and the others in the financial markets.

Downing Street could present a strong case in its defence. The forecasts provided by the OBR were deemed insufficient for comfort, especially given that lenders charge the UK the greatest borrowing cost of all G7 rich countries – higher than France, which lost its leader, and exceeding Japan that carries way more debt. Coupled with the policies to cap fuel bills, prescription charges and train fares, Starmer together with Reeves argue this budget enables the Bank of England to cut interest rates.

It's understandable that those folk with Labour badges may choose not to couch it in such terms next time they visit the doorstep. According to one independent adviser to Downing Street puts it, Reeves has "weaponised" financial markets to act as an instrument of control over her own party and the voters. This is the reason the chancellor cannot resign, regardless of which promises are broken. It's the reason Labour MPs will have to knuckle down and vote that cut billions from social security, just as Starmer indicated yesterday.

Missing Political Vision , a Broken Promise

What's missing here is the notion of statecraft, of mobilising the Treasury and the central bank to reach a new accommodation with investors. Also absent is innate understanding of voters,