🔗 Share this article

This accusation represents a grave matter: that Rachel Reeves may have lied to UK citizens, scaring them to accept billions in extra taxes that could be spent on increased welfare payments. However exaggerated, this isn't usual Westminster sparring; on this occasion, the stakes are more serious. A week ago, critics of Reeves alongside Keir Starmer were labeling their budget "chaotic". Today, it is branded as lies, and Kemi Badenoch calling for the chancellor to quit.

This serious accusation requires straightforward responses, so here is my assessment. Has the chancellor been dishonest? Based on the available evidence, no. There were no whoppers. However, despite Starmer's recent comments, it doesn't follow that there's no issue here and we should move on. Reeves did misinform the public about the factors shaping her choices. Was it to channel cash to "benefits street", like the Tories claim? Certainly not, as the numbers prove it.

A Reputation Takes A Further Hit, But Facts Must Prevail

The Chancellor has taken a further blow to her reputation, however, if facts still matter in politics, Badenoch should stand down her attack dogs. Perhaps the resignation yesterday of OBR head, Richard Hughes, due to the leak of its internal documents will satisfy Westminster's thirst for blood.

But the real story is far stranger than the headlines suggest, extending wider and further than the political futures of Starmer and the 2024 intake. Fundamentally, this is a story about what degree of influence the public get in the governance of the nation. This should should worry everyone.

Firstly, on to the Core Details

After the OBR released last Friday a portion of the forecasts it shared with Reeves while she wrote the red book, the surprise was instant. Not only had the OBR never done such a thing before (described as an "exceptional move"), its figures seemingly went against Reeves's statements. Even as leaks from Westminster were about how bleak the budget would have to be, the OBR's own forecasts were improving.

Take the Treasury's so-called "iron-clad" fiscal rule, that by 2030 day-to-day spending for hospitals, schools, and other services would be completely funded by taxes: at the end of October, the OBR reckoned this would barely be met, albeit by a tiny margin.

A few days later, Reeves held a press conference so extraordinary that it caused breakfast TV to interrupt its usual fare. Several weeks before the actual budget, the nation was put on alert: taxes were going up, and the primary cause being gloomy numbers from the OBR, specifically its conclusion that the UK had become less efficient, putting more in but getting less out.

And lo! It came to pass. Notwithstanding the implications from Telegraph editorials combined with Tory broadcast rounds suggested over the weekend, this is basically what happened at the budget, which was significant, harsh, and grim.

The Deceptive Alibi

The way in which Reeves misled us concerned her alibi, because these OBR forecasts didn't compel her actions. She could have made different options; she could have given alternative explanations, even on budget day itself. Before last year's election, Starmer pledged precisely this kind of public influence. "The hope of democracy. The power of the vote. The possibility for national renewal."

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

She did make decisions, only not the kind Labour wishes to publicize. Starting April 2029 British workers as well as businesses are set to be contributing another £26bn annually in tax – but the majority of this will not go towards spent on improved healthcare, new libraries, nor happier lives. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "benefits street".

Where the Cash Actually Ends Up

Instead of going on services, over 50% of this extra cash will in fact provide Reeves cushion against her own budgetary constraints. Approximately 25% is allocated to covering the government's own policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt to Reeves, only 17% of the taxes will go on genuinely additional spending, for example scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury only £2.5bn, as it was always an act of theatrical cruelty by George Osborne. This administration should have have binned it in its first 100 days.

The Real Target: The Bond Markets

The Tories, Reform along with all of right-wing media have spent days railing against 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 to their social concerns, safeguarding the most vulnerable. Both sides are completely mistaken: The Chancellor's budget was largely aimed at investment funds, speculative capital and the others in the financial markets.

The government can make a strong case in its defence. The forecasts from the OBR were deemed insufficient to feel secure, especially given that bond investors charge the UK the greatest borrowing cost of all G7 rich countries – higher than France, which lost its leader, higher than Japan which has way more debt. Coupled with our measures to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget enables the Bank of England to cut interest rates.

It's understandable why those wearing red rosettes might not frame it in such terms when they're on #Labourdoorstep. 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 the chancellor can't resign, regardless of which pledges she breaks. It is also the reason Labour MPs will have to knuckle down and vote that cut billions from social security, just as Starmer promised recently.

Missing Statecraft and a Broken Pledge

What is absent from this is any sense of strategic governance, of harnessing the finance ministry and the Bank to reach a new accommodation with markets. Missing too is intuitive knowledge of voters,