🔗 Share this article

The accusation is a serious one: suggesting Rachel Reeves may have deceived the British public, spooking them to accept billions in extra taxes which would be spent on increased benefits. While exaggerated, this is not usual Westminster sparring; this time, the stakes could be damaging. Just last week, critics of Reeves and Keir Starmer had been calling their budget "a shambles". Now, it's branded as falsehoods, with Kemi Badenoch calling for the chancellor to quit.

This serious accusation demands straightforward responses, so here is my assessment. Has the chancellor been dishonest? On current evidence, apparently not. She told no whoppers. But, despite Starmer's yesterday's remarks, it doesn't follow that there is nothing to see and we should move on. Reeves did misinform the public about the considerations informing her decisions. Was this all to channel cash towards "welfare recipients", like the Tories assert? Certainly not, as the numbers demonstrate this.

A Standing Takes Another Blow, But Facts Must Win Out

The Chancellor has sustained a further hit to her reputation, but, if facts continue to matter in politics, Badenoch should stand down her lynch mob. Maybe the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will satisfy Westminster's appetite for scandal.

Yet the real story is much more unusual compared to the headlines suggest, extending wider and further than the political futures of Starmer and his 2024 intake. Fundamentally, herein lies an account concerning what degree of influence the public get in the running of the nation. And it concern you.

First, on to Brass Tacks

When the OBR published last Friday a portion of the projections it shared with Reeves while she wrote the red book, the surprise was instant. Not only has the OBR not done such a thing before (an "rare action"), its numbers seemingly went against Reeves's statements. While leaks from Westminster were about how bleak the budget was going to be, the OBR's own predictions were improving.

Take the government's so-called "iron-clad" rule, stating by 2030 day-to-day spending for hospitals, schools, and the rest would be completely paid for by taxes: at the end of October, the OBR reckoned this would barely be met, albeit only by a minuscule margin.

A few days later, Reeves gave a media briefing so extraordinary it forced morning television to interrupt its usual fare. Several weeks before the actual budget, the country was warned: taxes were going up, and the primary cause cited as gloomy numbers provided by the OBR, in particular its conclusion suggesting the UK was less productive, putting more in but getting less out.

And so! It happened. Despite the implications from Telegraph editorials and Tory media appearances implied recently, that is essentially what happened at the budget, that proved to be big and painful and bleak.

The Deceptive Alibi

The way in which Reeves misled us concerned her justification, since these OBR forecasts did not compel her actions. She might have made different options; she could have given other reasons, even on budget day itself. Before last year's election, Starmer promised precisely this kind of public influence. "The hope of democracy. The power of the vote. The potential for national renewal."

One year later, yet it's a lack of agency that is evident from Reeves's breakfast speech. The first Labour chancellor in 15 years casts herself as an apolitical figure at the mercy of factors beyond her control: "In the context of the persistent challenges with our productivity … any chancellor of any party would be standing here today, facing the decisions that I face."

She did make a choice, just not the kind Labour cares to publicize. Starting April 2029 UK workers as well as businesses will be contributing another £26bn annually in taxes – but most of that will not be spent on better hospitals, public services, nor happier lives. Whatever bilge is spouted by Nigel Farage, Badenoch and their allies, it is not being lavished upon "welfare claimants".

Where the Cash Actually Ends Up

Rather than being spent, more than 50% of the additional revenue will instead provide Reeves a buffer against her self-imposed budgetary constraints. Approximately 25% is allocated to covering the administration's U-turns. Examining the OBR's calculations and being as generous as possible to Reeves, a mere 17% of the taxes will go on actual new spending, for example abolishing the limit on child benefit. Removing it "will cost" the Treasury only £2.5bn, as it was always a bit of political theatre from George Osborne. A Labour government should have have binned it immediately upon taking office.

The Real Target: Financial Institutions

Conservatives, Reform and the entire right-wing media have been barking about the idea that Reeves conforms to the stereotype of Labour chancellors, soaking hard workers to fund the workshy. Party MPs have been applauding her budget for being balm for their social concerns, safeguarding the disadvantaged. Each group are 180-degrees wrong: The Chancellor's budget was largely aimed at investment funds, speculative capital and participants within the bond markets.

The government could present a strong case in its defence. The forecasts from the OBR were insufficient to feel secure, particularly given that lenders demand from the UK the greatest borrowing cost among G7 developed nations – higher than France, which lost its leader, and exceeding Japan which has way more debt. Coupled with our policies to cap fuel bills, prescription charges and train fares, Starmer and Reeves argue their plan enables the central bank to reduce its key lending rate.

You can see that those folk with Labour badges might not couch it in such terms when they're on the doorstep. According to one independent adviser for Downing Street puts it, Reeves has "weaponised" the bond market to act as an instrument of control over her own party and the electorate. This is why Reeves cannot resign, no matter what pledges are broken. It is also why Labour MPs will have to fall into line and vote that cut billions from social security, just as Starmer indicated yesterday.

A Lack of Statecraft and an Unfulfilled Pledge

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