🔗 Share this article

The allegation carries significant weight: that Rachel Reeves may have misled the British public, spooking them into accepting massive additional taxes which could be used for higher benefits. However exaggerated, this is not usual political sparring; this time, the consequences are more serious. Just last week, detractors aimed at Reeves alongside Keir Starmer were labeling their budget "a mess". Today, it's branded as falsehoods, and Kemi Badenoch calling for the chancellor's resignation.

This grave accusation requires straightforward responses, therefore let me provide my assessment. Has the chancellor lied? Based on current evidence, apparently not. There were no major untruths. However, notwithstanding Starmer's recent comments, that doesn't mean there is no issue here and we should move on. The Chancellor did misinform the public regarding the factors shaping her decisions. Was this all to funnel cash to "benefits street", as the Tories claim? Certainly not, and the figures prove this.

A Reputation Takes Another Blow, But Facts Must Prevail

The Chancellor has taken another hit to her standing, however, if facts still have anything to do with politics, Badenoch ought to call off her lynch mob. Perhaps the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will satisfy SW1's appetite for scandal.

Yet the real story is much more unusual compared to media reports suggest, and stretches wider and further beyond the careers of Starmer and his 2024 intake. Fundamentally, this is a story concerning how much say the public get over the governance of our own country. And it should worry you.

First, to Brass Tacks

When the OBR published recently a portion of the projections it shared with Reeves while she prepared the red book, the shock was instant. Not merely had the OBR not acted this way before (described as an "exceptional move"), its numbers seemingly went against Reeves's statements. While leaks from Westminster suggested the grim nature of the budget was going to be, the watchdog's forecasts were getting better.

Take the Treasury's most "iron-clad" fiscal rule, stating by 2030 daily spending for hospitals, schools, and the rest must be wholly paid for by taxes: at the end of October, the watchdog reckoned this would barely be met, albeit by a tiny margin.

Several days later, Reeves gave a media briefing so unprecedented that it caused morning television to break from its usual fare. Weeks prior to the actual budget, the country was put on alert: taxes would rise, and the main reason being pessimistic numbers from the OBR, specifically its finding suggesting the UK was less productive, putting more in but getting less out.

And lo! It happened. Notwithstanding what Telegraph editorials combined with Tory media appearances suggested recently, that is essentially what transpired at the budget, which was significant, harsh, and grim.

The Misleading Alibi

Where Reeves deceived us was her justification, since those OBR forecasts didn't compel her actions. She could have chosen different options; she could have given other reasons, including on budget day itself. Prior to the recent election, Starmer promised exactly such people power. "The hope of democracy. The strength of the vote. The potential for national renewal."

A year on, yet it's a lack of agency that is evident in Reeves's breakfast speech. The first Labour chancellor in 15 years portrays herself as an apolitical figure at the mercy of factors beyond her control: "Given the circumstances of the persistent challenges with our productivity … any chancellor of any political stripe would be in this position today, confronting the decisions that I face."

She certainly make a choice, just not one the Labour party wishes to publicize. Starting April 2029 British workers as well as businesses will be paying an additional £26bn a year in tax – and most of that will not go towards spent on improved healthcare, public services, nor enhanced wellbeing. Whatever bilge comes from Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Cash Actually Ends Up

Rather than going on services, more than 50% of this additional revenue will in fact give Reeves a buffer against her self-imposed fiscal rules. Approximately 25% goes on covering the government's own U-turns. Reviewing the watchdog's figures and giving maximum benefit of the doubt to a Labour chancellor, only 17% of the tax take will fund actual new spending, such as scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, as it was always an act of theatrical cruelty by George Osborne. This administration could and should have binned it immediately upon taking office.

The True Audience: The Bond Markets

The Tories, Reform along with the entire Blue Pravda have spent days barking about the idea that Reeves conforms to the stereotype of left-wing finance ministers, soaking strivers to spend on the workshy. Labour backbenchers have been applauding her budget for being a relief for their social concerns, protecting the most vulnerable. Each group could be completely mistaken: The Chancellor's budget was primarily targeted towards investment funds, hedge funds and the others in the financial markets.

The government can make a strong case in its defence. The forecasts from the OBR were insufficient for comfort, particularly given that bond investors charge the UK the highest interest rate of all G7 developed nations – exceeding that of France, that recently lost its leader, higher than Japan which has way more debt. Combined with the policies to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say their plan allows the central bank to reduce interest rates.

It's understandable why those wearing Labour badges might not couch it in such terms when they visit #Labourdoorstep. According to a consultant for Downing Street puts it, Reeves has effectively "utilised" financial markets to act as a tool of discipline over Labour MPs and the voters. This is why Reeves cannot resign, no matter what promises she breaks. It's why Labour MPs will have to fall into line and support measures to take billions off social security, as Starmer indicated yesterday.

A Lack of Political Vision , a Broken Promise

What's missing from this is the notion of strategic governance, of harnessing the Treasury and the Bank to reach a fresh understanding with investors. Missing too is any innate understanding of voters,