The allegation is a serious one: that Rachel Reeves may have deceived UK citizens, spooking them into accepting massive extra taxes which could be funneled into higher benefits. While exaggerated, this is not usual Westminster sparring; on this occasion, the consequences could be damaging. A week ago, critics of Reeves alongside Keir Starmer had been calling their budget "disorderly". Now, it's denounced as lies, and Kemi Badenoch calling for the chancellor to quit.
Such a serious accusation requires straightforward responses, therefore let me provide my assessment. Did the chancellor tell lies? Based on current information, apparently not. There were no major untruths. However, despite Starmer's yesterday's remarks, it doesn't follow that there's nothing to see and we can all move along. Reeves did mislead the public regarding the considerations shaping her decisions. Was it to funnel cash to "benefits street", as the Tories assert? Certainly not, as the numbers demonstrate this.
A Reputation Takes Another Hit, Yet Truth Must Win Out
The Chancellor has taken another hit to her reputation, however, should facts continue to matter in politics, Badenoch should stand down her lynch mob. Maybe the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the unauthorized release of its own documents will quench Westminster's thirst for blood.
Yet the true narrative is far stranger than the headlines suggest, and stretches broader and deeper than the careers of Starmer and the 2024 intake. At its heart, this is a story concerning what degree of influence the public have in the running of our own country. And it concern everyone.
First, on to Brass Tacks
After the OBR published recently some of the forecasts it shared with Reeves while she wrote the budget, the surprise was immediate. Not only had the OBR never done such a thing before (an "exceptional move"), its figures seemingly went against Reeves's statements. While rumors from Westminster were about how bleak the budget would have to be, the watchdog's forecasts were getting better.
Consider the government's most "unbreakable" fiscal rule, stating by 2030 day-to-day spending on hospitals, schools, and other services must be wholly paid for by taxes: in late October, the watchdog calculated it would barely be met, albeit only by a tiny margin.
A few days later, Reeves gave a press conference so extraordinary it forced breakfast TV to break from its usual fare. Weeks prior to the actual budget, the country was warned: taxes were going up, and the main reason being pessimistic numbers from the OBR, specifically its conclusion that the UK was less efficient, putting more in but yielding less.
And so! It happened. Notwithstanding what Telegraph editorials and Tory broadcast rounds implied recently, that is basically what happened during the budget, that proved to be big and painful and bleak.
The Deceptive Alibi
Where Reeves misled us was her alibi, because those OBR forecasts did not compel her actions. She could have made different options; she could have given alternative explanations, including during the statement. Before the recent election, Starmer pledged precisely this kind of public influence. "The promise of democracy. The power of the vote. The potential 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 portrays herself as an apolitical figure buffeted by forces outside her influence: "In the context of the long-term challenges with our productivity … any chancellor of any political stripe would be in this position today, facing the choices that I face."
She did make a choice, only not one Labour wishes to broadcast. From April 2029 UK workers and businesses will be paying an additional £26bn a year in tax – but most of that will not go towards spent on improved healthcare, public services, nor happier lives. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and their allies, it isn't getting splashed on "benefits street".
Where the Cash Actually Ends Up
Instead of being spent, over 50% of this additional revenue will instead provide Reeves cushion against her self-imposed budgetary constraints. Approximately 25% is allocated to paying for the administration's policy reversals. Reviewing the watchdog's figures and giving maximum benefit of the doubt to a Labour chancellor, a mere 17% of the taxes will fund genuinely additional spending, such as scrapping the two-child cap on child benefit. Its abolition "will cost" the Treasury a mere £2.5bn, as it was always an act of political theatre by George Osborne. A Labour government should have abolished it in its first 100 days.
The True Audience: Financial Institutions
The Tories, Reform along with the entire Blue Pravda have spent days railing against the idea that Reeves conforms to the caricature of Labour chancellors, taxing hard workers to fund the workshy. Labour backbenchers are cheering her budget as balm to their troubled consciences, protecting the disadvantaged. Each group could be completely mistaken: The Chancellor's budget was largely aimed at asset managers, hedge funds and the others in the bond markets.
The government can make a strong case in its defence. The forecasts from the OBR were deemed insufficient to feel secure, particularly given that bond investors charge the UK the greatest borrowing cost among G7 rich countries – higher than France, which lost its leader, and exceeding Japan which has way more debt. Combined with the measures to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget allows the central bank to cut interest rates.
It's understandable why those wearing Labour badges might not couch it this way when they're on the doorstep. As a consultant to Downing Street puts it, Reeves has effectively "weaponised" the bond market to act as an instrument of discipline over her own party and the electorate. It's why Reeves can't resign, no matter what promises she breaks. It is also the reason Labour MPs will have to fall into line and support measures that cut billions from social security, as Starmer indicated recently.
Missing Statecraft , an Unfulfilled Promise
What is absent here is the notion of strategic governance, of mobilising the Treasury and the central bank to forge a new accommodation with markets. Also absent is any intuitive knowledge of voters,
