🔗 Share this article

The charge is a serious one: suggesting Rachel Reeves has misled Britons, frightening them to accept massive additional taxes that would be spent on higher benefits. While hyperbolic, this isn't typical political bickering; on this occasion, the stakes are more serious. Just last week, critics of Reeves and Keir Starmer were labeling their budget "a shambles". Today, it is branded as lies, with Kemi Badenoch calling for the chancellor's resignation.

Such a serious accusation demands clear answers, so here is my assessment. Has the chancellor lied? On the available information, apparently not. There were no blatant falsehoods. However, despite Starmer's recent comments, it doesn't follow that there's nothing to see and we should move on. The Chancellor did mislead the public regarding the considerations informing her decisions. Was it to funnel cash to "welfare recipients", as the Tories assert? No, as the figures demonstrate this.

A Standing Sustains A Further Hit, Yet Truth Must Prevail

Reeves has sustained a further blow to her standing, however, should facts still have anything to do with politics, Badenoch should call off her attack dogs. Maybe the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will quench SW1's thirst for blood.

Yet the real story is far stranger compared to media reports suggest, and stretches broader and deeper beyond the political futures of Starmer and the 2024 intake. At its heart, herein lies an account concerning what degree of influence you and I have over the governance of the nation. And it concern you.

First, on to Brass Tacks

After the OBR published recently a portion of the forecasts it provided to Reeves as she wrote the red book, the shock was immediate. Not merely had the OBR not done such a thing before (described as an "rare action"), its numbers seemingly went against the chancellor's words. Even as leaks from Westminster were about how bleak the budget was going to be, the OBR's own forecasts were getting better.

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

Several days later, Reeves gave a media briefing so unprecedented that it caused breakfast TV to interrupt its usual fare. Weeks prior to the actual budget, the nation was warned: taxes were going up, with the primary cause being gloomy numbers provided by the OBR, specifically its conclusion suggesting the UK had become less efficient, putting more in but getting less out.

And lo! It happened. Notwithstanding what Telegraph editorials combined with Tory broadcast rounds implied over the weekend, that is essentially what transpired during the budget, which was big and painful and bleak.

The Misleading Justification

Where Reeves deceived us concerned her justification, since those OBR forecasts didn't force her hand. She might have made other choices; she might have given alternative explanations, including during the statement. Prior to the recent election, Starmer promised 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 is evident in Reeves's pre-budget speech. The first Labour chancellor in 15 years casts herself to be an apolitical figure at the mercy of factors beyond her control: "Given the circumstances of the long-term challenges with our productivity … any chancellor of any political stripe would be standing here today, confronting the decisions that I face."

She certainly make a choice, only not the kind Labour wishes to broadcast. Starting April 2029 UK workers and businesses are set to be contributing an additional £26bn annually in taxes – and the majority of this will not go towards funding better hospitals, new libraries, or enhanced wellbeing. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it is not getting splashed on "benefits street".

Where the Cash Actually Ends Up

Rather than being spent, over 50% of the extra cash will in fact provide Reeves cushion against her own budgetary constraints. About 25% goes on paying for the administration's policy reversals. Reviewing the OBR's calculations and being as generous as possible to Reeves, only 17% of the tax take will fund actual new spending, for example scrapping the limit on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, as it was always a bit of political theatre by George Osborne. A Labour government could and should have binned it immediately upon taking office.

The True Audience: The Bond Markets

Conservatives, Reform along with the entire right-wing media have spent days barking about how Reeves conforms to the caricature of Labour chancellors, soaking hard workers to fund the workshy. Labour backbenchers have been applauding her budget for being a relief to their social concerns, protecting the most vulnerable. Each group could be completely mistaken: The Chancellor's budget was largely aimed at investment funds, hedge funds and participants within the financial markets.

The government can make a strong case for itself. The forecasts from the OBR were deemed too small for comfort, particularly given that lenders demand from the UK the greatest borrowing cost of all G7 rich countries – higher than France, which 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 their plan enables the central bank to cut its key lending rate.

You can see why those folk with Labour badges may choose not to couch it this way when they visit the doorstep. According to a consultant to Downing Street puts it, Reeves has effectively "utilised" the bond market to act as an instrument of control against her own party and the electorate. It's why the chancellor can't resign, regardless of which promises are broken. It is also why Labour MPs must fall into line and support measures to take billions off social security, just as Starmer indicated yesterday.

Missing Statecraft , an Unfulfilled Pledge

What is absent here is the notion of strategic governance, of harnessing the Treasury and the Bank to reach a fresh understanding with investors. Also absent is innate understanding of voters,