🔗 Share this article

The charge represents a grave matter: that Rachel Reeves may have misled UK citizens, scaring them into accepting massive additional taxes which would be used for increased welfare payments. While hyperbolic, this is not typical political bickering; this time, the consequences are more serious. Just last week, detractors aimed at Reeves and Keir Starmer had been calling their budget "a mess". Today, it is branded as falsehoods, with Kemi Badenoch demanding the chancellor's resignation.

Such a grave charge demands straightforward answers, so let me provide my view. Did the chancellor tell lies? On current evidence, apparently not. She told no whoppers. 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 regarding the considerations informing her decisions. Was it to channel cash towards "welfare recipients", like the Tories claim? No, and the figures prove this.

A Reputation Sustains A Further Blow, Yet Truth Must Prevail

The Chancellor has taken another blow to her standing, however, should facts still have anything to do with politics, Badenoch should stand down her lynch mob. Perhaps the stepping down yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its own documents will quench SW1's thirst for blood.

Yet the true narrative is far stranger than media reports indicate, and stretches wider and further than the careers of Starmer and his class of '24. At its heart, herein lies an account concerning how much say the public get over the governance of the nation. And it concern you.

First, to Brass Tacks

When the OBR published last Friday a portion of the forecasts it shared with Reeves as she wrote the budget, the surprise was immediate. Not only has the OBR never acted this way before (described as an "unusual step"), its numbers seemingly went against Reeves's statements. Even as leaks from Westminster were about how bleak the budget was going to be, the watchdog's forecasts were improving.

Consider the government's so-called "iron-clad" rule, stating by 2030 daily spending on hospitals, schools, and the rest must be completely paid for by taxes: in late October, the watchdog reckoned it would just about be met, albeit by a tiny margin.

A few days later, Reeves gave a press conference so extraordinary it forced morning television to break from its regular schedule. Weeks before the real budget, the nation was put on alert: taxes were going up, and the main reason being pessimistic numbers from the OBR, in particular its finding that the UK was less efficient, investing more but getting less out.

And lo! It happened. Despite what Telegraph editorials combined with Tory media appearances suggested over the weekend, this is basically what happened at the budget, that proved to be significant, harsh, and grim.

The Deceptive Justification

Where Reeves misled us was her justification, because those OBR forecasts did not force her hand. She could have chosen different options; she might have provided alternative explanations, even on budget day itself. Before the recent election, Starmer pledged exactly such people power. "The hope of democracy. The strength of the vote. The possibility for national renewal."

One year later, yet it is powerlessness that jumps out from Reeves's breakfast speech. The first Labour chancellor in 15 years casts herself to be an apolitical figure buffeted by forces outside her influence: "Given the circumstances of the persistent challenges with our productivity … any finance minister of any party would be in this position today, confronting the decisions that I face."

She did make a choice, just not one the Labour party cares to publicize. Starting April 2029 UK workers and businesses will be contributing an additional £26bn annually in taxes – and the majority of this will not be spent on improved healthcare, new libraries, or enhanced wellbeing. Whatever nonsense is spouted by Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Money Actually Ends Up

Instead of being spent, over 50% of the extra cash will in fact provide Reeves a buffer against her self-imposed fiscal rules. About 25% is allocated to paying for the administration's policy reversals. Reviewing the watchdog's figures and giving maximum benefit of the doubt to Reeves, a mere 17% of the tax take will go on actual new spending, for example abolishing the two-child cap on child benefit. Its abolition "costs" the Treasury only £2.5bn, because it was always a bit of theatrical cruelty from George Osborne. This administration could and should abolished it in its first 100 days.

The Real Target: Financial Institutions

Conservatives, Reform and all of Blue Pravda have been railing against the idea that Reeves conforms to the caricature of left-wing finance ministers, taxing strivers to spend on shirkers. Party MPs are applauding her budget as a relief to their troubled consciences, protecting the most vulnerable. Each group could be 180-degrees wrong: The Chancellor's budget was largely targeted towards investment funds, hedge funds and participants within the financial markets.

The government could present a compelling argument in its defence. The margins provided by the OBR were deemed too small for comfort, particularly considering lenders demand from the UK the highest interest rate among G7 developed nations – exceeding that of France, which lost its leader, and exceeding Japan that carries way more debt. Coupled with the measures to cap fuel bills, prescription charges and train fares, Starmer together with Reeves argue their plan enables the Bank of England to cut interest rates.

You can see that those wearing red rosettes may choose not to couch it in such terms when they visit the doorstep. According to a consultant to Downing Street puts it, Reeves has effectively "weaponised" financial markets to act as a tool of discipline over her own party and the electorate. This is the reason the chancellor cannot resign, no matter what pledges she breaks. It is also why Labour MPs will have to knuckle down and support measures to take billions off social security, just as Starmer indicated recently.

A Lack of Statecraft , a Broken Pledge

What is absent here is any sense of strategic governance, of mobilising the finance ministry and the central bank to reach a fresh understanding with markets. Also absent is any intuitive knowledge of voters,