🔗 Share this article

The charge represents a grave matter: suggesting Rachel Reeves may have deceived Britons, spooking them into accepting billions in extra taxes that could be funneled into higher benefits. However exaggerated, this isn't typical Westminster bickering; this time, the stakes are more serious. Just last week, critics aimed at Reeves alongside Keir Starmer had been labeling their budget "a mess". Now, it is denounced as lies, and Kemi Badenoch demanding the chancellor's resignation.

This grave accusation demands clear responses, so here is my view. Did the chancellor been dishonest? On the available information, no. She told no blatant falsehoods. But, despite Starmer's recent comments, that doesn't mean there's nothing to see and we can all move along. The Chancellor did mislead the public regarding the factors shaping her choices. Was this all to funnel cash towards "welfare recipients", like the Tories assert? Certainly not, and the figures prove it.

A Standing Takes Another Hit, But Facts Must Prevail

The Chancellor has sustained a further blow to her standing, but, should facts continue to have anything to do with politics, Badenoch should stand down her lynch mob. Perhaps the resignation recently of OBR head, Richard Hughes, due to the unauthorized release of its internal documents will satisfy SW1's appetite for scandal.

But the real story is much more unusual compared to the headlines indicate, and stretches wider and further beyond the political futures of Starmer and the class of '24. Fundamentally, herein lies an account about what degree of influence the public have over the governance of our own country. This should should worry everyone.

First, to Brass Tacks

When the OBR released last Friday some of the forecasts it shared with Reeves as she prepared the red book, the shock was instant. Not merely had the OBR not acted this way before (described as an "unusual step"), its figures seemingly went against the chancellor's words. While rumors from Westminster were about how bleak the budget would have to be, the watchdog's forecasts were improving.

Take the government's most "unbreakable" fiscal rule, stating by 2030 day-to-day spending for hospitals, schools, and the rest must be wholly funded by taxes: in late October, the OBR calculated this would barely be met, albeit by a tiny margin.

Several days later, Reeves held a media briefing so extraordinary it forced breakfast TV to break from its usual fare. Several weeks prior to the real budget, the country was warned: taxes were going up, and the main reason cited as pessimistic numbers provided by the OBR, specifically its finding that the UK was less efficient, putting more in but yielding less.

And lo! It came to pass. Despite what Telegraph editorials combined with Tory media appearances implied over the weekend, this is basically what transpired at the budget, which was big and painful and bleak.

The Misleading Justification

The way in which Reeves misled us was her justification, since these OBR forecasts didn't force her hand. She might have made different options; she might have provided other reasons, even on budget day itself. Before last year's election, Starmer pledged exactly such people power. "The hope of democracy. The strength of the vote. The possibility for national renewal."

One year later, and it's a lack of agency that is evident in Reeves's pre-budget speech. The first Labour chancellor for a decade and a half portrays herself to be a technocrat buffeted by forces outside her influence: "In the context of the long-term challenges with our productivity … any chancellor of any party would be standing here today, confronting the decisions that I face."

She certainly make decisions, only not one Labour cares to broadcast. Starting April 2029 British workers as well as businesses are set to be contributing an additional £26bn annually in tax – but most of that will not go towards funding improved healthcare, new libraries, nor happier lives. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and others, it isn't being lavished upon "benefits street".

Where the Money Really Goes

Instead of going on services, over 50% of the extra cash will in fact give Reeves a buffer for her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the administration's U-turns. Reviewing the watchdog's figures and being as generous as possible towards Reeves, a mere 17% of the tax take will fund actual new spending, such as abolishing the two-child cap on child benefit. Removing it "costs" the Treasury only £2.5bn, because it had long been a bit of theatrical cruelty by George Osborne. This administration should have have binned it in its first 100 days.

The Real Target: Financial Institutions

The Tories, Reform along with the entire Blue Pravda have been barking about how Reeves conforms to the caricature of left-wing finance ministers, soaking strivers to spend on shirkers. Labour backbenchers are cheering her budget for being balm to their social concerns, safeguarding the disadvantaged. Each group are 180-degrees wrong: The Chancellor's budget was largely aimed at asset managers, hedge funds and the others in the financial markets.

The government could present a strong case in its defence. The forecasts from the OBR were deemed insufficient for comfort, especially considering lenders charge the UK the highest interest rate among G7 developed nations – higher than France, that recently lost its leader, higher than Japan which has far greater debt. Combined with our measures to hold down fuel bills, prescription charges and train fares, Starmer and Reeves can say their plan enables the central bank to reduce its key lending rate.

It's understandable why those folk with Labour badges may choose not to couch it in such terms when they visit the doorstep. As one independent adviser to Downing Street puts it, Reeves has "utilised" the bond market as an instrument of control over her own party and the electorate. This is why Reeves can't resign, regardless of which pledges she breaks. It's why Labour MPs must fall into line and vote that cut billions from social security, as Starmer indicated yesterday.

Missing Statecraft , an Unfulfilled Pledge

What is absent here is the notion of strategic governance, of mobilising the Treasury and the central bank to reach a fresh understanding with investors. Also absent is intuitive knowledge of voters,