🔗 Share this article

This accusation represents a grave matter: that Rachel Reeves may have lied to Britons, frightening them into accepting billions in extra taxes which could be funneled into higher benefits. However exaggerated, this isn't typical political bickering; on this occasion, the stakes are higher. A week ago, detractors of Reeves and Keir Starmer had been calling their budget "a shambles". Now, it's branded as falsehoods, and Kemi Badenoch demanding Reeves to step down.

This grave charge requires clear answers, therefore let me provide my assessment. Has the chancellor been dishonest? On current evidence, no. There were no whoppers. But, notwithstanding Starmer's recent remarks, it doesn't follow that there is nothing to see and we should move on. The Chancellor did mislead the public about the factors shaping her choices. Was it to channel cash towards "benefits street", as the Tories assert? No, as the figures prove it.

A Reputation Sustains Another Hit, But Facts Must Prevail

The Chancellor has taken a further hit to her reputation, but, if facts continue to have anything to do with politics, Badenoch should call off her lynch mob. Perhaps the resignation yesterday of OBR head, Richard Hughes, due to the leak of its internal documents will quench Westminster's thirst for blood.

Yet the true narrative is much more unusual than media reports suggest, extending broader and deeper than the political futures of Starmer and his 2024 intake. Fundamentally, this is an account concerning how much say you and I have in the running of the nation. This should should worry everyone.

First, to Brass Tacks

After the OBR published recently a portion of the projections it shared with Reeves while she wrote the budget, the shock was instant. Not only had the OBR not done such a thing before (described as an "unusual step"), its figures seemingly contradicted Reeves's statements. Even as rumors from Westminster were about the grim nature of the budget would have to be, the watchdog's predictions were getting better.

Take the Treasury's most "unbreakable" fiscal rule, stating by 2030 day-to-day spending for hospitals, schools, and other services must be wholly funded by taxes: in late October, the OBR reckoned this would just about be met, albeit by a minuscule margin.

A few days later, Reeves held a media briefing so extraordinary it forced breakfast TV to break from its regular schedule. Weeks before the actual budget, the country was put on alert: taxes would rise, and the main reason being pessimistic numbers provided by the OBR, specifically its conclusion suggesting the UK was less efficient, investing more but yielding less.

And so! 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 Alibi

The way in which Reeves misled us was her justification, since those OBR forecasts didn't force her hand. She might have chosen different options; she could have given alternative explanations, including during the statement. Before last year's election, Starmer promised exactly such people power. "The promise of democracy. The power of the vote. The potential for national renewal."

One year later, yet it is a lack of agency that jumps out from Reeves's pre-budget speech. The first Labour chancellor in 15 years portrays herself to be an apolitical figure at the mercy of forces 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 decisions that I face."

She did make decisions, just not one Labour cares to broadcast. Starting April 2029 British workers as well as businesses are set to be contributing an additional £26bn a year in taxes – but the majority of this will not go towards spent on improved healthcare, public services, nor enhanced wellbeing. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "welfare claimants".

Where the Money Actually Ends Up

Rather than going on services, more than 50% of this additional revenue will instead give Reeves cushion against her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the government's own policy reversals. Reviewing the watchdog's figures and giving maximum benefit of the doubt towards Reeves, only 17% of the tax take will go on actual new spending, such as scrapping the two-child cap on child benefit. Removing it "will cost" the Treasury a mere £2.5bn, as it had long been an act of political theatre by George Osborne. This administration could and should abolished it in its first 100 days.

The Real Target: Financial Institutions

The Tories, Reform along with all of right-wing media have spent days barking about the idea that Reeves fits the stereotype of left-wing finance ministers, soaking hard workers to fund the workshy. Labour backbenchers are cheering her budget for being balm for their troubled consciences, protecting the most vulnerable. Each group are 180-degrees wrong: Reeves's budget was primarily targeted towards asset managers, hedge funds and the others in the financial markets.

The government could present a strong case in its defence. The margins provided by the OBR were deemed too small to feel secure, particularly given that lenders demand from the UK the greatest borrowing cost of all G7 rich countries – higher than France, which lost its leader, and exceeding Japan which has way more debt. Combined with our policies to cap fuel bills, prescription charges as well as train fares, Starmer together with Reeves can say their plan enables the central bank to reduce its key lending rate.

It's understandable that those wearing Labour badges may choose not to frame it this way next time they visit the doorstep. As one independent adviser to Downing Street says, Reeves has "weaponised" financial markets to act as a tool of control over Labour MPs and the electorate. It's why Reeves cannot resign, regardless of which promises she breaks. It is also the reason Labour MPs must knuckle down and support measures that cut billions from social security, as Starmer promised yesterday.

Missing Statecraft and an Unfulfilled Promise

What is absent from this is the notion of strategic governance, of mobilising the finance ministry and the central bank to reach a fresh understanding with investors. Also absent is any innate understanding of voters,