🔗 Share this article

The accusation represents a grave matter: that Rachel Reeves has lied to UK citizens, frightening them into accepting billions in additional taxes which could be spent on increased welfare payments. While hyperbolic, this isn't typical political bickering; on this occasion, the stakes are more serious. Just last week, detractors aimed at Reeves and Keir Starmer had been calling their budget "disorderly". Now, it's denounced as lies, with Kemi Badenoch demanding Reeves to step down.

This serious accusation demands straightforward answers, so let me provide my view. Did the chancellor lied? Based on current evidence, no. She told no major untruths. But, notwithstanding Starmer's recent remarks, that doesn't mean there's no issue here and we should move on. Reeves did mislead the public regarding the factors informing her choices. Was it to funnel cash to "welfare recipients", like the Tories claim? No, as the numbers prove this.

A Standing Sustains Another Blow, Yet Truth Must Win Out

Reeves has taken a further blow to her reputation, but, if facts still have anything to do with politics, Badenoch ought to call off her attack dogs. Maybe the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will quench Westminster's thirst for blood.

Yet the true narrative is far stranger compared to media reports suggest, extending wider and further than the careers of Starmer and the class of '24. At its heart, herein lies an account about what degree of influence you and I get in the running of our own country. This should concern everyone.

Firstly, on to the Core Details

When the OBR released recently a portion of the forecasts it shared with Reeves while she prepared the red book, the surprise was instant. Not merely had the OBR never done such a thing before (described as an "unusual step"), its numbers apparently went against the chancellor's words. While rumors from Westminster suggested how bleak the budget was going to be, the OBR's own forecasts were improving.

Take the government's most "iron-clad" rule, that by 2030 day-to-day spending on hospitals, schools, and other services would be completely funded by taxes: in late October, the watchdog calculated this would just about be met, albeit by a minuscule margin.

A few days later, Reeves held a press conference so extraordinary that it caused morning television to break from its usual fare. Weeks before the actual budget, the country was warned: taxes would rise, and the primary cause cited as pessimistic numbers provided by the OBR, in particular its finding that the UK was less efficient, putting more in but getting less out.

And lo! It happened. Despite the implications from Telegraph editorials and Tory broadcast rounds suggested over the weekend, this is basically what transpired during the budget, that proved to be big and painful and bleak.

The Deceptive Justification

Where Reeves deceived us was her alibi, because these OBR forecasts did not compel her actions. She might have made different options; she could have given alternative explanations, even on budget day itself. Prior to last year's election, Starmer pledged precisely this kind of people power. "The promise of democracy. The power 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. Our first Labour chancellor for a decade and a half casts herself as a technocrat buffeted by factors beyond her control: "Given the circumstances of the persistent challenges on our productivity … any chancellor of any political stripe would be standing here today, facing the decisions that I face."

She did make decisions, just not one Labour cares to publicize. Starting April 2029 UK workers as well as businesses will be paying another £26bn annually in tax – and most of that will not go towards funding improved healthcare, public services, or enhanced wellbeing. Whatever nonsense is spouted by Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Money Really Goes

Instead of being spent, over 50% of the extra cash will instead give Reeves a buffer against her self-imposed budgetary constraints. About 25% is allocated to covering 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 tax take will fund genuinely additional spending, such as scrapping the limit on child benefit. Removing it "will cost" the Treasury only £2.5bn, as it had long been a bit of theatrical cruelty from George Osborne. This administration could and should abolished it in its first 100 days.

The Real Target: The Bond Markets

Conservatives, Reform along with all of Blue Pravda have spent days barking about the idea that Reeves conforms to the stereotype of left-wing finance ministers, taxing hard workers to spend on shirkers. Labour backbenchers are cheering her budget as a relief for their troubled consciences, protecting the disadvantaged. Both sides are 180-degrees wrong: The Chancellor's budget was largely targeted towards asset managers, speculative capital and participants within the bond markets.

The government could present a strong case for itself. The margins from the OBR were insufficient to feel secure, particularly considering lenders charge the UK the highest interest rate among G7 developed nations – higher than France, that recently lost its leader, and exceeding Japan that carries way more debt. Combined with the measures to hold down fuel bills, prescription charges as well as train fares, Starmer and Reeves can say their plan enables the central bank to cut its key lending rate.

It's understandable that those wearing red rosettes might not couch it in such terms next time they're on #Labourdoorstep. As one independent adviser for Downing Street puts it, Reeves has "weaponised" financial markets as an instrument of discipline against her own party and the electorate. This is the reason Reeves cannot resign, regardless of which promises are broken. It is also the reason Labour MPs will have to fall into line and vote that cut billions from social security, as Starmer indicated recently.

Missing Statecraft and an Unfulfilled Promise

What is absent from this is the notion of strategic governance, of harnessing the Treasury and the central bank to reach a new accommodation with investors. Also absent is any innate understanding of voters,