🔗 Share this article

The charge is a serious one: suggesting Rachel Reeves has lied to the British public, spooking them to accept massive extra taxes that would be spent on higher benefits. However hyperbolic, this is not usual Westminster sparring; on this occasion, the consequences are more serious. Just last week, detractors aimed at Reeves and Keir Starmer were labeling their budget "uncoordinated". Today, it's branded as lies, with Kemi Badenoch demanding the chancellor to quit.

Such a grave charge demands clear answers, so let me provide my view. Has the chancellor lied? Based on current evidence, apparently not. There were no blatant falsehoods. But, notwithstanding Starmer's yesterday's comments, it doesn't follow that there's no issue here and we should move on. The Chancellor did misinform the public regarding the considerations shaping her choices. Was it to channel cash towards "welfare recipients", like the Tories assert? Certainly not, and the numbers prove this.

A Reputation Takes Another Blow, Yet Truth Should Win Out

The Chancellor has taken a further blow to her standing, however, if facts still have anything to do with politics, Badenoch should stand down her lynch mob. Perhaps the resignation recently of OBR head, Richard Hughes, due to the leak of its internal documents will quench Westminster's thirst for blood.

Yet the real story is far stranger than media reports indicate, extending wider and further beyond the political futures of Starmer and the class of '24. Fundamentally, herein lies an account concerning what degree of influence you and I get over the running of the nation. This should concern everyone.

First, on to the Core Details

When the OBR published last Friday a portion of the forecasts it shared with Reeves while she prepared the budget, the shock was instant. Not only had the OBR never acted this way before (described as an "exceptional move"), its numbers apparently went against Reeves's statements. Even as leaks from Westminster suggested how bleak the budget was going to be, the watchdog's predictions were improving.

Consider the government's so-called "unbreakable" rule, that by 2030 daily spending for hospitals, schools, and other services must be completely funded by taxes: in late October, the OBR reckoned it would barely be met, albeit by a minuscule margin.

Several days later, Reeves gave a press conference so extraordinary that it caused morning television to interrupt its usual fare. Weeks before the real budget, the country was put on alert: taxes were going up, with the primary cause cited as pessimistic numbers from the OBR, in particular its finding suggesting the UK had become less efficient, investing more but yielding less.

And lo! It came to pass. Despite what Telegraph editorials and Tory broadcast rounds suggested recently, that is essentially what transpired during the budget, which was big and painful and bleak.

The Misleading Alibi

Where Reeves deceived us concerned her alibi, since these OBR forecasts didn't compel her actions. She could have made other choices; she could have provided alternative explanations, including on budget day itself. Before last year's election, Starmer promised exactly such people power. "The promise of democracy. The strength of the vote. The potential for national renewal."

A year on, and it is powerlessness that jumps out from Reeves's breakfast speech. Our first Labour chancellor in 15 years casts herself to be a technocrat at the mercy of factors outside her influence: "In the context of the long-term challenges with our productivity … any chancellor of any political stripe would be in this position today, confronting the choices that I face."

She certainly make a choice, just not the kind Labour cares to broadcast. From April 2029 British workers and businesses will be paying an additional £26bn a year in tax – but most of that will not be funding better hospitals, public services, or happier lives. Whatever nonsense comes from Nigel Farage, Badenoch and others, it is not being lavished upon "benefits street".

Where the Money Really Goes

Rather than going on services, over 50% of the additional revenue will in fact provide Reeves cushion against her own budgetary constraints. Approximately 25% is allocated to covering the administration's U-turns. Reviewing the watchdog's figures and being as generous as possible to Reeves, a mere 17% of the tax take will go on genuinely additional spending, such as abolishing the two-child cap on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, because it was always a bit of political theatre from George Osborne. This administration should have have binned it in its first 100 days.

The True Audience: Financial Institutions

Conservatives, Reform and the entire Blue Pravda have spent days barking about the idea that Reeves fits the caricature of left-wing finance ministers, taxing hard workers to fund shirkers. Party MPs are cheering her budget as a relief for their social concerns, protecting the most vulnerable. Both sides could be 180-degrees wrong: Reeves's budget was primarily aimed at asset managers, hedge funds and the others in the bond markets.

Downing Street could present a compelling argument for itself. The margins provided by the OBR were deemed insufficient for comfort, particularly given that lenders charge the UK the greatest borrowing cost of all G7 developed nations – exceeding that of France, that recently lost a prime minister, and exceeding Japan that carries way more debt. Combined with our policies to cap fuel bills, prescription charges and train fares, Starmer together with Reeves can say their plan allows the Bank of England to cut its key lending rate.

It's understandable that those wearing red rosettes may choose not to frame it this way next time they're on #Labourdoorstep. As a consultant for Downing Street says, Reeves has "weaponised" the bond market to act as a tool of control against her own party and the electorate. It's the reason Reeves cannot resign, no matter what pledges she breaks. It's the reason Labour MPs must fall into line and support measures that cut billions from social security, as Starmer indicated recently.

A Lack of Statecraft and an Unfulfilled Promise

What's missing here is the notion of statecraft, of mobilising the finance ministry and the Bank to reach a fresh understanding with markets. Also absent is innate understanding of voters,