The Biggest Inaccurate Aspect of the Chancellor's Economic Statement? Who It Was Truly Aimed At.
The allegation is a serious one: suggesting Rachel Reeves has misled the British public, frightening them into accepting massive extra taxes which could be used for higher welfare payments. However hyperbolic, this is not usual political bickering; this time, the stakes could be damaging. A week ago, detractors of Reeves and Keir Starmer were calling their budget "a mess". Today, it's denounced as lies, with Kemi Badenoch calling for Reeves to step down.
Such a serious charge requires straightforward responses, therefore let me provide my assessment. Did the chancellor tell lies? On the available evidence, no. She told no whoppers. But, notwithstanding Starmer's recent comments, that doesn't mean there is nothing to see and we should move on. The Chancellor did misinform the public regarding the considerations shaping her decisions. Was it to channel cash to "welfare recipients", like the Tories claim? No, and the figures demonstrate it.
A Standing Sustains A Further Blow, But Facts Should Prevail
Reeves has sustained another blow to her reputation, but, should facts continue to matter in politics, Badenoch ought to stand down her lynch mob. Maybe the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, over the leak of its internal documents will satisfy SW1's appetite for scandal.
But the real story is much more unusual than media reports indicate, and stretches broader and deeper beyond the careers of Starmer and the 2024 intake. Fundamentally, this is a story about what degree of influence you and I have in the governance of the nation. This should concern you.
Firstly, to the Core Details
When the OBR released last Friday a portion of the forecasts it shared with Reeves while she prepared the budget, the shock was immediate. Not only had the OBR not done such a thing before (described as an "rare action"), its figures apparently contradicted Reeves's statements. Even as leaks from Westminster were about the grim nature of the budget was going to be, the watchdog's forecasts were getting better.
Take the government's most "unbreakable" rule, that by 2030 day-to-day spending on hospitals, schools, and the rest would be wholly funded by taxes: at the end of October, the OBR reckoned it would barely be met, albeit only by a minuscule margin.
Several days later, Reeves held a media briefing so unprecedented it forced breakfast TV to interrupt its regular schedule. Several weeks prior to the actual budget, the country was put on alert: taxes were going up, and the primary cause being pessimistic numbers from the OBR, in particular its conclusion suggesting the UK was less productive, investing more but yielding less.
And lo! It came to pass. Despite the implications from Telegraph editorials combined with Tory media appearances implied recently, that is basically what happened at the budget, that proved to be significant, harsh, and grim.
The Deceptive Alibi
Where Reeves deceived us was her alibi, since those OBR forecasts didn't compel her actions. She could have chosen other choices; she could have provided other reasons, including on budget day itself. Before last year's election, Starmer promised exactly such public influence. "The promise of democracy. The power of the vote. The possibility for national renewal."
A year on, yet it's powerlessness that jumps out in Reeves's pre-budget speech. Our first Labour chancellor in 15 years casts herself as an apolitical figure at the mercy of factors outside her influence: "In the context of the long-term challenges on our productivity … any chancellor of any political stripe would be in this position today, facing the choices that I face."
She certainly make decisions, only not one the Labour party cares to broadcast. Starting April 2029 British workers as well as businesses will be paying another £26bn annually in taxes – and the majority of this will not go towards funding better hospitals, new libraries, nor enhanced wellbeing. Whatever bilge comes from Nigel Farage, Badenoch and others, it isn't getting splashed on "welfare claimants".
Where the Money Actually Ends Up
Rather than going on services, over 50% of the additional revenue will in fact provide Reeves cushion against her own budgetary constraints. About 25% is allocated to covering the administration's U-turns. Reviewing the watchdog's figures and being as generous as possible towards a Labour chancellor, only 17% of the tax take will go on actual new spending, for example abolishing the limit on child benefit. Removing it "costs" the Treasury a mere £2.5bn, as it had long been a bit of theatrical cruelty from George Osborne. A Labour government could and should have binned it in its first 100 days.
The Real Target: The Bond Markets
Conservatives, Reform and all of right-wing media have spent days barking about how Reeves fits the caricature of Labour chancellors, soaking strivers to fund shirkers. Party MPs have been cheering her budget as a relief to their social concerns, safeguarding the disadvantaged. Each group are 180-degrees wrong: Reeves's budget was largely targeted towards investment funds, speculative capital and the others in the financial markets.
Downing Street can make a compelling argument for itself. The margins from the OBR were insufficient to feel secure, especially given that lenders demand from the UK the highest interest rate of all G7 developed nations – exceeding that of France, which lost its leader, higher than Japan that carries far greater debt. Coupled with the policies to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget enables the Bank of England to reduce interest rates.
You can see that those folk with red rosettes may choose not to couch it this way when they visit #Labourdoorstep. According to one independent adviser for Downing Street puts it, Reeves has "weaponised" the bond market as a tool of discipline over her own party and the voters. This is why Reeves can't resign, regardless of which pledges she breaks. It's the reason Labour MPs will have to fall into line and vote to take billions off social security, as Starmer indicated recently.
A Lack of Statecraft and a Broken Promise
What's missing here is any sense of statecraft, of mobilising the Treasury and the Bank to forge a new accommodation with markets. Missing too is any intuitive knowledge of voters,
