The accusation carries significant weight: suggesting Rachel Reeves has deceived the British public, frightening them to accept billions in additional taxes which could be spent on higher welfare payments. While hyperbolic, this isn't typical Westminster bickering; on this occasion, the consequences are higher. A week ago, critics aimed at Reeves and Keir Starmer had been labeling their budget "a shambles". Today, it's denounced as lies, with Kemi Badenoch calling for the chancellor to quit.
This serious charge requires straightforward answers, so let me provide my assessment. Did the chancellor tell lies? Based on current information, apparently not. There were no whoppers. But, despite Starmer's recent comments, it doesn't follow that there is no issue here and we should move on. The Chancellor did misinform the public about the considerations informing her choices. Was it to channel cash towards "welfare recipients", as the Tories assert? Certainly not, as the numbers prove it.
Reeves has sustained a further hit to her reputation, but, should facts continue to have anything to do with politics, Badenoch ought to call off her attack dogs. Perhaps the resignation recently of OBR head, Richard Hughes, over the leak of its internal documents will quench Westminster's thirst for blood.
But the true narrative is much more unusual compared to media reports indicate, extending wider and further than the political futures of Starmer and the 2024 intake. Fundamentally, herein lies a story concerning what degree of influence you and I get over the governance of the nation. This should should worry you.
When the OBR released recently a portion of the projections it provided to Reeves while she wrote the red book, the surprise was immediate. Not merely had the OBR not acted this way before (described as an "rare action"), its numbers seemingly contradicted the chancellor's words. Even as leaks from Westminster suggested the grim nature of the budget would have to be, the OBR's own forecasts were getting better.
Take the government's most "iron-clad" rule, stating by 2030 daily spending for hospitals, schools, and other services would be completely paid for by taxes: at the end of October, the OBR calculated this would barely be met, albeit by a tiny margin.
A few days later, Reeves held a press conference so extraordinary that it caused morning television to break from its usual fare. Several weeks before the actual budget, the nation was put on alert: taxes would rise, with the main reason cited as gloomy numbers from the OBR, in particular its conclusion that the UK was less efficient, putting more in but getting less out.
And lo! It came to pass. Notwithstanding what Telegraph editorials combined with Tory media appearances implied over the weekend, this is basically what happened at the budget, which was significant, harsh, and grim.
Where Reeves misled us concerned her alibi, because these OBR forecasts did not force her hand. She might have chosen different options; she might have provided alternative explanations, even on budget day itself. Prior to last year's election, Starmer promised exactly such public influence. "The promise of democracy. The strength of the vote. The potential for national renewal."
One year later, yet it is powerlessness that is evident in Reeves's pre-budget speech. The first Labour chancellor in 15 years casts herself as an apolitical figure buffeted by factors outside her influence: "In the context of the long-term challenges with our productivity … any finance minister of any party would be standing here today, confronting the choices that I face."
She did make decisions, just not the kind the Labour party wishes to publicize. Starting April 2029 UK workers as well as businesses are set to be contributing an additional £26bn annually in tax – and the majority of this will not go towards funding better hospitals, public services, nor happier lives. Whatever bilge is spouted by Nigel Farage, Badenoch and others, it is not getting splashed on "benefits street".
Rather than going on services, more than 50% of the additional revenue will instead give Reeves a buffer against her self-imposed budgetary constraints. About 25% goes on paying for the administration's U-turns. Examining the watchdog's figures and giving maximum benefit of the doubt towards a Labour chancellor, a mere 17% of the taxes will go on actual new spending, for example scrapping the two-child cap on child benefit. Removing it "costs" the Treasury only £2.5bn, as it had long been a bit of political theatre by George Osborne. This administration should have abolished it immediately upon taking office.
The Tories, Reform along with all of Blue Pravda have been barking about the idea that Reeves fits the caricature of left-wing finance ministers, soaking strivers to fund shirkers. Labour backbenchers have been cheering her budget as a relief to their social concerns, protecting the most vulnerable. Both sides are completely mistaken: The Chancellor's budget was primarily aimed at asset managers, speculative capital and the others in the financial markets.
Downing Street could present a compelling argument in its defence. The margins from the OBR were deemed insufficient for comfort, particularly given that lenders charge the UK the greatest borrowing cost among G7 rich countries – higher than France, which lost its leader, higher than Japan which has way more debt. Coupled with the policies to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves argue their plan allows the central bank to cut interest rates.
You can see that those folk with red rosettes may choose not to couch it this way next time they're on the doorstep. According to a consultant for Downing Street puts it, Reeves has "utilised" financial markets as a tool of discipline against Labour MPs and the voters. It's why Reeves can't resign, no matter what pledges she breaks. It is also the reason Labour MPs will have to knuckle down and support measures to take billions off social security, just as Starmer promised recently.
What is absent here is the notion of strategic governance, of harnessing the finance ministry and the central bank to forge a new accommodation with markets. Also absent is intuitive knowledge of voters,
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