🔗 Share this article

The allegation represents a grave matter: that Rachel Reeves may have deceived Britons, frightening them into accepting massive additional taxes that would be used for increased benefits. While hyperbolic, this is not typical political bickering; this time, the consequences could be damaging. A week ago, critics aimed at Reeves and Keir Starmer were calling their budget "a shambles". Now, it is branded as lies, and Kemi Badenoch demanding Reeves to step down.

Such a grave charge requires clear answers, therefore here is my assessment. Did the chancellor lied? Based on current information, apparently not. She told no whoppers. But, despite Starmer's recent remarks, that doesn't mean there is nothing to see and we should move on. The Chancellor did mislead the public regarding the factors shaping her decisions. Was it to channel cash to "benefits street", like the Tories claim? Certainly not, and the figures prove this.

A Standing Takes Another Hit, Yet Truth Should Win Out

The Chancellor has taken another blow to her reputation, however, if facts continue to have anything to do with politics, Badenoch ought to stand down her lynch mob. Maybe the stepping down yesterday of OBR head, Richard Hughes, over the unauthorized release of its own documents will satisfy SW1's appetite for scandal.

But the true narrative is far stranger compared to the headlines suggest, and stretches wider and further than the political futures of Starmer and his 2024 intake. Fundamentally, this is a story concerning what degree of influence the public have over the running of the nation. And it concern you.

First, on to the Core Details

When the OBR published recently some of the forecasts it provided to Reeves while she prepared the budget, the shock was immediate. Not merely had the OBR never acted this way before (an "unusual step"), its figures apparently went against the chancellor's words. Even as leaks from Westminster suggested how bleak the budget was going to be, the watchdog's predictions were improving.

Take the Treasury's most "unbreakable" fiscal rule, stating by 2030 daily spending on hospitals, schools, and the rest must be completely funded by taxes: at the end of October, the watchdog calculated it would just about be met, albeit only by a tiny margin.

Several days later, Reeves held a press conference so extraordinary that it caused morning television to interrupt its usual fare. Weeks before the real budget, the nation was warned: taxes were going up, and the primary cause being pessimistic numbers from the OBR, specifically its finding that the UK had become less efficient, investing more but getting less out.

And lo! It happened. Despite the implications from Telegraph editorials and Tory media appearances suggested recently, that is basically what happened at the budget, which was big and painful and bleak.

The Misleading Justification

Where Reeves misled us concerned her justification, because these OBR forecasts did not force her hand. She could have made different options; she might have provided alternative explanations, even on budget day itself. Prior to the recent election, Starmer pledged exactly such public influence. "The hope of democracy. The power of the vote. The possibility for national renewal."

One year later, and it's powerlessness that is evident in Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half casts herself as a technocrat at the mercy of 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 choices that I face."

She did make a choice, only not one Labour cares to publicize. Starting April 2029 British workers as well as businesses will be paying an additional £26bn annually in taxes – and most of that will not be spent on better hospitals, public services, or enhanced wellbeing. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "benefits street".

Where the Cash Actually Ends Up

Instead of going on services, over 50% of this additional revenue will instead give Reeves a buffer against her own fiscal rules. Approximately 25% goes on covering the administration's policy reversals. Reviewing 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, such as abolishing the limit on child benefit. Its abolition "costs" the Treasury only £2.5bn, because it had long been an act of political theatre from George Osborne. A Labour government should have abolished it in its first 100 days.

The True Audience: The Bond Markets

Conservatives, Reform and all of Blue Pravda have spent days barking about how Reeves fits the stereotype of Labour chancellors, soaking hard workers to spend on the workshy. Labour backbenchers have been cheering her budget for being a relief for their social concerns, protecting the disadvantaged. Both sides could be 180-degrees wrong: The Chancellor's budget was largely aimed at asset managers, speculative capital and participants within the financial markets.

The government could present a strong case in its defence. The forecasts from the OBR were insufficient for comfort, particularly given that bond investors charge the UK the highest interest rate among G7 developed nations – higher than France, which lost a prime minister, higher than Japan which has way more debt. Coupled with the policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves can say their plan allows the central bank to reduce its key lending rate.

It's understandable why those folk with red rosettes may choose not to frame it this way when they visit #Labourdoorstep. As one independent adviser to Downing Street puts it, Reeves has "utilised" the bond market as an instrument of discipline against Labour MPs and the electorate. This is why Reeves cannot resign, regardless of which pledges are broken. It's why Labour MPs must knuckle down and vote that cut billions from social security, as Starmer indicated yesterday.

Missing Statecraft , an Unfulfilled Pledge

What's missing here is any sense of strategic governance, of harnessing the Treasury and the central bank to forge a fresh understanding with investors. Missing too is any innate understanding of voters,