🔗 Share this article

The accusation represents a grave matter: suggesting Rachel Reeves has lied to UK citizens, frightening them into accepting massive extra taxes which could be used for higher welfare payments. However exaggerated, this is not typical Westminster bickering; this time, the stakes are more serious. A week ago, detractors aimed at Reeves and Keir Starmer had been labeling their budget "chaotic". Today, it's denounced as lies, with Kemi Badenoch demanding Reeves to step down.

Such a grave accusation requires clear responses, so let me provide my view. Has the chancellor lied? On current evidence, apparently not. There were no blatant falsehoods. But, notwithstanding Starmer's yesterday's comments, that doesn't mean there is no issue here and we can all move along. Reeves did misinform the public about the considerations shaping her decisions. Was it to funnel cash towards "benefits street", as the Tories assert? Certainly not, as the figures prove it.

A Reputation Takes Another Hit, But Facts Should Prevail

Reeves has taken a further blow to her standing, but, if facts still matter in politics, Badenoch ought to stand down her lynch mob. Perhaps the stepping down recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will satisfy SW1's thirst for blood.

Yet the true narrative is much more unusual compared to media reports suggest, extending wider and further than the political futures of Starmer and the 2024 intake. Fundamentally, this is a story about how much say you and I get over the running of the nation. And it concern everyone.

Firstly, to the Core Details

When the OBR published recently a portion of the forecasts it provided to Reeves while she wrote the budget, the surprise was instant. Not only had the OBR never done such a thing before (described as an "unusual step"), its figures apparently went against the chancellor's words. While leaks from Westminster were about how bleak the budget was going to be, the watchdog's predictions were improving.

Consider the Treasury's so-called "iron-clad" fiscal rule, stating by 2030 daily spending on hospitals, schools, and other services must be wholly paid for by taxes: in late October, the OBR reckoned it would just about be met, albeit only by a minuscule margin.

Several days later, Reeves held a media briefing so unprecedented that it caused morning television to interrupt its usual fare. Several weeks before the real budget, the nation was put on alert: taxes would rise, and the main reason being gloomy numbers provided by the OBR, specifically its conclusion suggesting the UK was less productive, putting more in but getting less out.

And so! It came to pass. Notwithstanding the implications from Telegraph editorials combined with Tory media appearances implied over the weekend, that is essentially what happened at the budget, which was significant, harsh, and grim.

The Deceptive Justification

Where Reeves deceived us was her justification, since these OBR forecasts didn't compel her actions. She might have chosen different options; she might have given alternative explanations, even on budget day itself. Prior to the recent election, Starmer promised exactly such public influence. "The promise of democracy. The strength of the vote. The potential for national renewal."

A year on, and it's powerlessness that jumps out from Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half portrays herself as an apolitical figure buffeted by forces outside her influence: "Given the circumstances of the persistent challenges with our productivity … any finance minister of any party would be in this position today, confronting the decisions that I face."

She certainly make a choice, only not one the Labour party wishes to publicize. From April 2029 UK workers as well as businesses will be paying an additional £26bn annually in tax – but most of that will not be spent on improved healthcare, new libraries, or enhanced wellbeing. Whatever bilge is spouted by Nigel Farage, Badenoch and others, it is not being lavished upon "benefits street".

Where the Money Really Goes

Rather than being spent, more than 50% of this extra cash will in fact provide Reeves a buffer for her self-imposed fiscal rules. Approximately 25% goes on covering the government's own U-turns. Examining the watchdog's figures and being as generous as possible to a Labour chancellor, a mere 17% of the tax take will fund genuinely additional spending, for example abolishing the two-child cap on child benefit. Removing it "costs" the Treasury only £2.5bn, as it had long been a bit of political theatre by George Osborne. A Labour government could and should have binned it in its first 100 days.

The True Audience: The Bond Markets

The Tories, Reform along with the entire Blue Pravda have been barking about how Reeves fits the caricature of Labour chancellors, soaking hard workers to spend on the workshy. Party MPs have been applauding her budget for being balm for their social concerns, protecting the disadvantaged. Both sides are completely mistaken: Reeves's budget was largely targeted towards asset managers, speculative capital and participants within the financial markets.

The government could present a strong case for itself. The margins provided by the OBR were deemed too small for comfort, especially considering bond investors charge the UK the greatest borrowing cost among G7 developed nations – exceeding that of France, that recently lost a prime minister, and exceeding Japan which has way more debt. Combined with our measures to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say their plan enables the central bank to cut interest rates.

You can see that those wearing Labour badges may choose not to couch it this way next time they visit the doorstep. As one independent adviser for Downing Street says, Reeves has "utilised" financial markets as a tool of discipline over her own party and the voters. This is the reason Reeves cannot resign, regardless of which pledges she breaks. It is also why Labour MPs must fall into line and vote to take billions off social security, just as Starmer indicated recently.

Missing Statecraft , an Unfulfilled Promise

What is absent from this is the notion of strategic governance, of mobilising the Treasury and the Bank to reach a new accommodation with investors. Also absent is intuitive knowledge of voters,