🔗 Share this article

This accusation represents a grave matter: that Rachel Reeves may have lied to UK citizens, scaring them to accept billions in extra taxes which would be used for higher benefits. However exaggerated, this is not typical Westminster sparring; this time, the consequences could be damaging. Just last week, detractors of Reeves alongside Keir Starmer had been calling their budget "uncoordinated". Today, it is denounced as lies, and Kemi Badenoch calling for the chancellor's resignation.

This grave accusation requires clear answers, so here is my view. Has the chancellor tell lies? Based on the available information, no. She told no blatant falsehoods. But, despite Starmer's recent comments, it doesn't follow that there's no issue here and we can all move along. Reeves did misinform the public about the factors shaping her decisions. Was it to funnel cash towards "benefits street", like the Tories claim? Certainly not, and the numbers prove it.

A Standing Sustains Another Blow, But Facts Must Prevail

Reeves has sustained another hit to her reputation, but, should facts continue to have anything to do with politics, Badenoch should stand down her attack dogs. Perhaps the resignation recently of OBR head, Richard Hughes, due to the unauthorized release of its internal documents will quench Westminster's appetite for scandal.

But the true narrative is much more unusual compared to media reports suggest, and stretches wider and further than the political futures of Starmer and the 2024 intake. At its heart, this is an account about how much say you and I have in the governance of our own country. This should should worry everyone.

First, to the Core Details

After the OBR published recently some of the projections it shared with Reeves while she wrote the red book, the surprise was immediate. Not only had the OBR not done such a thing before (described as an "rare action"), its numbers apparently contradicted the chancellor's words. While leaks from Westminster suggested the grim nature of the budget was going to be, the watchdog's predictions were getting better.

Take the Treasury's so-called "iron-clad" rule, that by 2030 day-to-day spending for hospitals, schools, and other services would be wholly paid for by taxes: in late October, the watchdog reckoned it would just about be met, albeit only by a minuscule margin.

Several days later, Reeves gave a press conference so extraordinary it forced morning television to interrupt its usual fare. Several weeks prior to the actual budget, the country was put on alert: taxes would rise, with the primary cause being pessimistic numbers provided by the OBR, specifically its finding that the UK was less efficient, investing more but getting less out.

And so! It came to pass. Notwithstanding what Telegraph editorials and Tory media appearances suggested recently, this is essentially what transpired during the budget, that proved to be big and painful and bleak.

The Misleading Justification

Where Reeves deceived us concerned her justification, since these OBR forecasts did not force her hand. She might have chosen different options; she might have given other reasons, including during the statement. Before last year's election, Starmer pledged exactly such people power. "The hope of democracy. The power of the vote. The possibility for national renewal."

A year on, yet it's powerlessness that jumps out from Reeves's breakfast speech. The first Labour chancellor for a decade and a half casts herself as a technocrat at the mercy of forces outside her influence: "Given the circumstances of the long-term challenges with our productivity … any chancellor of any party would be standing here today, facing the choices that I face."

She certainly make decisions, only not one Labour cares to broadcast. Starting April 2029 British workers and businesses will be paying an additional £26bn a year in taxes – but most of that will not be spent on improved healthcare, new libraries, or happier lives. Whatever nonsense comes from Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Money Actually Ends Up

Rather than going on services, over 50% of this additional revenue will instead provide Reeves a buffer for her self-imposed fiscal rules. Approximately 25% goes on paying for the government's own policy reversals. Examining the watchdog's figures and giving maximum benefit of the doubt to Reeves, only 17% of the tax take will go on actual new spending, such as scrapping the limit on child benefit. Removing it "costs" the Treasury a mere £2.5bn, because it had long been a bit of theatrical cruelty from George Osborne. This administration should have have binned it in its first 100 days.

The True Audience: Financial Institutions

The Tories, Reform along with all of Blue Pravda have spent days railing against the idea that Reeves fits the caricature of Labour chancellors, taxing strivers to fund the workshy. Party MPs have been cheering her budget for being balm for their troubled consciences, safeguarding the disadvantaged. Each group are completely mistaken: Reeves's budget was largely aimed at investment funds, hedge funds and the others in the financial markets.

Downing Street could present a compelling argument in its defence. The margins provided by the OBR were deemed insufficient for comfort, especially given that lenders charge the UK the highest interest rate of all G7 rich countries – exceeding that of France, which lost its leader, higher than Japan that carries way more debt. Coupled with our policies to cap fuel bills, prescription charges and train fares, Starmer and Reeves can say their plan enables the central bank to reduce interest rates.

It's understandable why those folk with red rosettes may choose not to frame it this way when they visit #Labourdoorstep. According to one independent adviser to Downing Street says, Reeves has effectively "weaponised" financial markets as a tool of control over her own party and the voters. It's why the chancellor cannot resign, regardless of which pledges she breaks. It is also why Labour MPs will have to fall into line and vote that cut billions from social security, as Starmer indicated yesterday.

A Lack of Statecraft , an Unfulfilled Promise

What's missing from this is any sense of strategic governance, of harnessing the Treasury and the Bank to forge a new accommodation with markets. Missing too is intuitive knowledge of voters,