The allegation carries significant weight: suggesting Rachel Reeves has lied to UK citizens, spooking them into accepting billions in additional taxes that would be used for higher benefits. While hyperbolic, this is not typical Westminster bickering; this time, the consequences could be damaging. Just last week, critics aimed at Reeves alongside Keir Starmer were labeling their budget "a shambles". Today, it is denounced as falsehoods, and Kemi Badenoch demanding the chancellor to quit.
This grave accusation requires clear answers, so here is my assessment. Has the chancellor lied? On current information, no. She told no whoppers. But, despite Starmer's recent remarks, that doesn't mean there's no issue here and we can all move along. The Chancellor did misinform the public about the considerations shaping her decisions. Was this all to funnel cash towards "benefits street", as the Tories assert? Certainly not, and the numbers prove it.
The Chancellor has taken a further blow to her reputation, however, should facts continue to matter in 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 satisfy SW1's appetite for scandal.
But the real story is much more unusual than the headlines indicate, and stretches broader and deeper than the careers of Starmer and his class of '24. At its heart, this is a story concerning what degree of influence you and I get in the running of our own country. This should concern everyone.
When the OBR released recently some of the projections it provided to Reeves as she prepared the budget, the shock was instant. Not only had the OBR never acted this way before (an "exceptional move"), its figures seemingly contradicted Reeves's statements. While leaks from Westminster were about how bleak the budget would have to be, the watchdog's forecasts were improving.
Take the Treasury's so-called "iron-clad" fiscal rule, stating by 2030 daily spending on hospitals, schools, and other services would be completely funded by taxes: at the end of October, the watchdog calculated this would barely be met, albeit only by a tiny margin.
Several days later, Reeves held a media briefing so unprecedented it forced breakfast TV to break from its usual fare. Several weeks before the real budget, the country was put on alert: taxes would rise, with the main reason being gloomy numbers provided by the OBR, specifically its finding suggesting the UK was less productive, putting more in but yielding less.
And so! It came to pass. Despite the implications from Telegraph editorials combined with Tory broadcast rounds implied recently, this is basically what happened during the budget, that proved to be significant, harsh, and grim.
The way in which Reeves deceived 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 exactly such people power. "The promise of democracy. The strength of the vote. The potential for national renewal."
A year on, and it is powerlessness that is evident in Reeves's breakfast speech. The first Labour chancellor for a decade and a half portrays herself as an apolitical figure at the mercy of factors beyond her control: "Given the circumstances of the persistent 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 decisions, just not the kind Labour wishes to publicize. From April 2029 UK workers as well as businesses are set to be contributing an additional £26bn a year in taxes – but the majority of this will not be spent on improved healthcare, public services, or happier lives. Regardless of what nonsense comes from Nigel Farage, Badenoch and their allies, it is not being lavished upon "benefits street".
Rather than being spent, more than 50% of this additional revenue will in fact provide Reeves cushion for her own budgetary constraints. About 25% is allocated to paying for the government's own U-turns. Examining the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, a mere 17% of the taxes will fund actual new spending, for example scrapping the two-child cap on child benefit. Its abolition "will cost" the Treasury only £2.5bn, as it had long been an act of political theatre by George Osborne. A Labour government should have have binned it immediately upon taking office.
The Tories, Reform and all of Blue Pravda have been barking about the idea that Reeves fits the stereotype of left-wing finance ministers, taxing hard workers to fund the workshy. Labour backbenchers have been applauding her budget for being balm to their social concerns, protecting the disadvantaged. Both sides could be completely mistaken: Reeves's budget was primarily targeted towards asset managers, speculative capital and participants within the bond markets.
Downing Street could present a compelling argument for itself. The margins provided by the OBR were insufficient for comfort, particularly given that bond investors charge the UK the greatest borrowing cost among G7 rich countries – higher than France, that recently lost its leader, higher than Japan which has way more debt. Combined with the measures to cap fuel bills, prescription charges and train fares, Starmer and Reeves argue this budget enables the Bank of England to reduce interest rates.
It's understandable that those folk with Labour badges might not frame it in such terms next time they're on #Labourdoorstep. As a consultant to Downing Street puts it, Reeves has effectively "utilised" financial markets as a tool of discipline against Labour MPs and the voters. This is why Reeves cannot resign, regardless of which pledges she breaks. It is also why Labour MPs must fall into line and support measures to take billions off social security, as Starmer promised recently.
What's missing here is any sense of statecraft, of harnessing the finance ministry and the central bank to forge a fresh understanding with investors. Missing too is any intuitive knowledge of voters,
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