🔗 Share this article

The accusation represents a grave matter: that Rachel Reeves has misled UK citizens, scaring them into accepting massive additional taxes that would be funneled into higher welfare payments. While hyperbolic, this isn't typical Westminster bickering; on this occasion, the consequences could be damaging. Just last week, critics of Reeves alongside Keir Starmer were labeling their budget "disorderly". Today, it's denounced as lies, and Kemi Badenoch demanding Reeves to step down.

This grave accusation requires straightforward answers, therefore let me provide my assessment. Did the chancellor been dishonest? On the available information, no. There were no major untruths. However, notwithstanding Starmer's recent comments, it doesn't follow that there is nothing to see and we can all move along. Reeves did misinform the public about the considerations informing her decisions. Was this all to funnel cash to "welfare recipients", like the Tories claim? No, as the numbers prove this.

A Reputation Takes A Further Blow, But Facts Should Prevail

The Chancellor has taken another hit to her standing, but, if facts still have anything to do with politics, Badenoch should stand down her attack dogs. Maybe the stepping down 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 far stranger compared to the headlines indicate, extending broader and deeper beyond the political futures of Starmer and his class of '24. Fundamentally, this is an account about what degree of influence the public have in the governance of our own country. And it concern you.

First, on to Brass Tacks

After the OBR published last Friday some of the forecasts it provided to Reeves as she prepared the budget, the surprise was immediate. Not only had the OBR never done such a thing before (described as an "exceptional move"), its figures seemingly went against the chancellor's words. Even as rumors from Westminster were about the grim nature of the budget was going to be, the watchdog's forecasts were improving.

Take the government's most "unbreakable" rule, stating by 2030 daily spending on hospitals, schools, and other services would be completely funded by taxes: at the end of October, the watchdog reckoned this would just about be met, albeit only by a minuscule margin.

A few days later, Reeves gave a media briefing so extraordinary that it caused breakfast TV to break from its usual fare. Weeks before the actual budget, the nation was warned: taxes would rise, with the main reason being pessimistic numbers from the OBR, specifically its conclusion that the UK had become less efficient, putting more in but getting less out.

And so! It came to pass. Notwithstanding what Telegraph editorials and Tory media appearances suggested over the weekend, that is basically what transpired during the budget, that proved to be significant, harsh, and grim.

The Deceptive Justification

Where Reeves deceived us concerned her justification, because these OBR forecasts didn't compel her actions. She might have made different options; she might have given alternative explanations, even during the statement. Prior to the recent election, Starmer pledged exactly such public influence. "The hope of democracy. The power of the vote. The possibility for national renewal."

A year on, yet it is powerlessness that is evident from Reeves's pre-budget speech. The first Labour chancellor in 15 years casts herself as a technocrat buffeted by forces outside her influence: "Given the circumstances of the persistent challenges on our productivity … any finance minister of any party would be standing here today, confronting the choices that I face."

She did make a choice, only not one Labour wishes to broadcast. From April 2029 British workers and businesses will be contributing another £26bn a year in taxes – and most of that will not go towards spent on improved healthcare, public services, nor happier lives. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it isn't getting splashed on "welfare claimants".

Where the Cash Really Goes

Instead of going on services, more than 50% of this additional revenue will in fact provide Reeves a buffer for her self-imposed fiscal rules. About 25% is allocated to covering the administration's U-turns. Reviewing the watchdog's figures and giving maximum benefit of the doubt towards Reeves, a mere 17% of the taxes will go on actual new spending, for example abolishing the two-child cap on child benefit. Removing it "costs" the Treasury a mere £2.5bn, as it was always a bit of political theatre by George Osborne. This administration could and should have binned it in its first 100 days.

The True Audience: The Bond Markets

Conservatives, Reform and the entire Blue Pravda have been barking about the idea that Reeves fits the stereotype of left-wing finance ministers, taxing hard workers to fund shirkers. Labour backbenchers are cheering her budget as balm for their troubled consciences, protecting the disadvantaged. Both sides are completely mistaken: The Chancellor's budget was largely aimed at asset managers, hedge funds and participants within the financial markets.

The government could present a strong case for itself. The margins from the OBR were too small for comfort, especially given that lenders charge the UK the greatest borrowing cost among G7 rich countries – exceeding that of France, that recently lost a prime minister, higher than Japan that carries far greater debt. Combined with our policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves can say this budget allows the central bank to cut interest rates.

It's understandable why those wearing red rosettes may choose not to couch it this way when they visit #Labourdoorstep. According to one independent adviser to Downing Street says, Reeves has effectively "weaponised" the bond market as an instrument of control over her own party and the electorate. It's the reason Reeves can't resign, no matter what pledges are broken. It is also the reason Labour MPs must knuckle down and vote that cut billions from social security, just as Starmer promised recently.

Missing Statecraft and a Broken Promise

What is absent here is any sense of strategic governance, of mobilising the Treasury and the Bank to forge a fresh understanding with markets. Missing too is intuitive knowledge of voters,