🔗 Share this article

The allegation carries significant weight: that Rachel Reeves has lied to UK citizens, frightening them into accepting billions in extra taxes which could be funneled into increased benefits. However hyperbolic, this is not usual political bickering; this time, the stakes are higher. Just last week, critics aimed at Reeves alongside Keir Starmer were calling their budget "disorderly". Today, it's denounced as falsehoods, with Kemi Badenoch demanding Reeves to step down.

Such a grave accusation requires straightforward answers, so here is my assessment. Has the chancellor lied? On current evidence, apparently not. There were no major untruths. But, despite Starmer's yesterday's comments, it doesn't follow that there's no issue here and we should move on. Reeves did mislead the public regarding the factors shaping her decisions. Was this all to channel cash to "welfare recipients", like the Tories assert? Certainly not, and the numbers demonstrate it.

A Reputation Sustains A Further Blow, Yet Truth Should Win Out

Reeves has taken another hit to her standing, however, should facts continue to have anything to do with politics, Badenoch ought to stand down her lynch mob. Maybe the stepping down recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will quench Westminster's appetite for scandal.

Yet the real story is much more unusual than media reports indicate, extending wider and further than the careers of Starmer and the 2024 intake. At its heart, herein lies an account concerning what degree of influence the public have over the running of our own country. And it should worry everyone.

Firstly, on to the Core Details

When the OBR released last Friday some of the projections it provided to Reeves while she prepared the red book, the shock was immediate. Not merely has the OBR never acted this way before (an "unusual step"), its numbers apparently contradicted the chancellor's words. Even as rumors from Westminster were about how bleak the budget would have to be, the watchdog's predictions were getting better.

Consider the Treasury's so-called "unbreakable" fiscal rule, that by 2030 day-to-day spending on hospitals, schools, and other services must be wholly paid for by taxes: in late October, the OBR reckoned it would barely be met, albeit by a tiny margin.

Several days later, Reeves gave a media briefing so extraordinary it forced breakfast TV to interrupt its usual fare. Several weeks prior to the actual budget, the nation was warned: taxes would rise, with the primary cause being gloomy numbers from the OBR, in particular its conclusion suggesting the UK was less productive, investing more but getting less out.

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

The Misleading Alibi

Where Reeves misled us concerned her alibi, because those OBR forecasts didn't compel her actions. She might have made different options; she could have provided alternative explanations, including during the statement. Prior to the recent election, Starmer pledged precisely this kind of people power. "The hope of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it is powerlessness that is evident in Reeves's breakfast speech. The first Labour chancellor for a decade and a half casts herself to be a technocrat buffeted by factors beyond her control: "In the context of the long-term challenges with our productivity … any chancellor of any political stripe would be in this position today, facing the choices that I face."

She did make decisions, just not the kind the Labour party wishes to publicize. From April 2029 British workers as well as businesses are set to be paying an additional £26bn a year in tax – and most of that will not go towards spent on improved healthcare, new libraries, nor enhanced wellbeing. Regardless of what bilge is spouted by Nigel Farage, Badenoch and their allies, it is not being lavished upon "benefits street".

Where the Cash Really Goes

Rather than being spent, more than 50% of this extra cash will instead give Reeves cushion for her own fiscal rules. Approximately 25% goes on covering the administration's policy reversals. Examining the watchdog's figures and being as generous as possible towards Reeves, only 17% of the taxes will fund actual new spending, such as scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, because it had long been a bit of theatrical cruelty by George Osborne. A Labour government could and should have binned it immediately upon taking office.

The True Audience: The Bond Markets

The Tories, Reform and the entire Blue Pravda have been barking about how Reeves conforms to the caricature of Labour chancellors, soaking hard workers to fund the workshy. Party MPs are applauding her budget for being balm for their troubled consciences, protecting the most vulnerable. Both sides could be completely mistaken: The Chancellor's budget was primarily aimed at investment funds, hedge funds and participants within the bond markets.

The government could present a compelling argument in its defence. The forecasts from the OBR were deemed too small to feel secure, particularly given that bond investors charge the UK the greatest borrowing cost of all G7 rich countries – exceeding that of France, which lost a prime minister, and exceeding Japan that carries far greater debt. Combined with the measures to cap fuel bills, prescription charges and train fares, Starmer together with Reeves argue their plan enables the Bank of England to cut interest rates.

It's understandable that those wearing Labour badges might not frame it this way when they visit #Labourdoorstep. According to a consultant for Downing Street puts it, Reeves has "weaponised" the bond market to act as an instrument of control against her own party and the electorate. It's the reason Reeves cannot resign, regardless of which pledges are broken. It is also the reason Labour MPs must knuckle down and vote to take billions off social security, as Starmer indicated yesterday.

Missing Statecraft and an Unfulfilled Promise

What's missing here is any sense of statecraft, of mobilising the finance ministry and the central bank to forge a new accommodation with investors. Missing too is intuitive knowledge of voters,