🔗 Share this article

This charge represents a grave matter: suggesting Rachel Reeves may have lied to the British public, frightening them into accepting billions in additional taxes that could be funneled into increased benefits. However exaggerated, this is not typical political bickering; this time, the consequences are higher. A week ago, critics of Reeves and Keir Starmer had been calling their budget "disorderly". Today, it is branded as lies, with Kemi Badenoch demanding the chancellor to quit.

This grave charge demands straightforward responses, so let me provide my assessment. Has the chancellor tell lies? Based on current evidence, apparently not. She told no blatant falsehoods. But, despite Starmer's recent remarks, that doesn't mean there's no issue here and we can all move along. The Chancellor did misinform the public about the factors informing her choices. Was this all to funnel cash to "benefits street", like the Tories assert? No, as the numbers demonstrate it.

A Standing Sustains A Further Blow, Yet Truth Must Prevail

The Chancellor has taken another blow to her standing, but, should facts still matter in politics, Badenoch ought to call off her lynch mob. Maybe 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 thirst for blood.

But the real story is much more unusual compared to the headlines suggest, extending broader and deeper beyond the careers of Starmer and his class of '24. Fundamentally, this is a story about what degree of influence the public get over the governance of the nation. And it should worry everyone.

First, to Brass Tacks

After the OBR released last Friday a portion of the projections it shared with Reeves while she wrote the budget, the shock was immediate. Not only had the OBR never acted this way before (described as an "unusual step"), its figures seemingly contradicted the chancellor's words. While leaks from Westminster were about how bleak the budget would have to be, the OBR's own forecasts were improving.

Consider the Treasury's so-called "unbreakable" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and the rest would be completely funded by taxes: in late October, the watchdog calculated this would barely be met, albeit by a minuscule margin.

A few days later, Reeves held a press conference so unprecedented it forced morning television to interrupt its regular schedule. Weeks prior to the real budget, the nation was warned: taxes were going up, with the main reason being gloomy numbers from the OBR, in particular its finding that the UK had become less efficient, investing more but getting less out.

And so! It happened. Notwithstanding the implications from Telegraph editorials combined with Tory media appearances implied recently, that is basically what transpired at the budget, which was big and painful and bleak.

The Deceptive Alibi

The way in which Reeves deceived us concerned her alibi, since those OBR forecasts did not compel her actions. She might have made other choices; she might have given other reasons, even during the statement. Before the recent election, Starmer pledged exactly such people power. "The hope of democracy. The strength of the vote. The potential for national renewal."

One year later, and it's a lack of agency that jumps out from Reeves's pre-budget speech. Our first Labour chancellor for a decade and a half casts herself to be an apolitical figure buffeted by factors beyond her control: "In the context of the persistent challenges with our productivity … any finance minister of any political stripe would be standing here today, confronting the choices that I face."

She did make decisions, just not one Labour cares to publicize. Starting April 2029 UK workers and businesses will be contributing an additional £26bn a year in tax – but the majority of this will not be funding better hospitals, public services, or enhanced wellbeing. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "welfare claimants".

Where the Cash Actually Ends Up

Rather than being spent, more than 50% of the extra cash will instead give Reeves a buffer for her self-imposed budgetary constraints. About 25% goes on covering the administration's policy reversals. Reviewing the watchdog's figures and being as generous as possible towards Reeves, a mere 17% of the taxes will fund genuinely additional spending, for example abolishing the two-child cap on child benefit. Its abolition "will cost" the Treasury a mere £2.5bn, as it had long been an act of political theatre by George Osborne. This administration should have abolished it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform along with the entire Blue Pravda have spent days railing against how Reeves fits the stereotype of Labour chancellors, soaking hard workers to fund shirkers. Party MPs are cheering her budget as a relief to their social concerns, protecting the most vulnerable. Both sides could be 180-degrees wrong: The Chancellor's budget was primarily targeted towards investment funds, speculative capital and the others in the financial markets.

Downing Street can make a strong case in its defence. The forecasts from the OBR were insufficient for comfort, especially given that bond investors charge the UK the highest interest rate of all G7 developed nations – higher than France, which lost a prime minister, higher than Japan which has way more debt. Combined with our policies to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget enables the central bank to reduce its key lending rate.

It's understandable that those wearing red rosettes may choose not to couch it this way next time they visit #Labourdoorstep. As one independent adviser for Downing Street puts it, Reeves has "utilised" financial markets to act as a tool of discipline over Labour MPs and the voters. This is the reason the chancellor can't resign, no matter what promises she breaks. It is also the reason Labour MPs must fall into line and support measures that cut billions from social security, as Starmer promised yesterday.

Missing Statecraft and a Broken Pledge

What's missing from this is the notion of strategic governance, of mobilising the Treasury and the Bank to forge a new accommodation with markets. Missing too is intuitive knowledge of voters,