The Biggest Inaccurate Part of the Chancellor's Fiscal Plan? The Real Audience Actually Aimed At.

The allegation is a serious one: that Rachel Reeves may have lied to Britons, frightening them to accept massive extra taxes which could be funneled into increased benefits. While exaggerated, this isn't usual Westminster sparring; on this occasion, the consequences could be damaging. Just last week, critics aimed at Reeves and Keir Starmer had been labeling their budget "a mess". Today, it's branded as falsehoods, and Kemi Badenoch demanding Reeves to step down.

Such a grave accusation requires straightforward answers, so let me provide my assessment. Did the chancellor lied? On current information, no. She told no blatant falsehoods. However, despite Starmer's yesterday's comments, that doesn't mean there's nothing to see and we should move on. The Chancellor did mislead the public regarding the considerations informing her choices. Was this all to channel cash to "welfare recipients", like the Tories claim? No, and the numbers demonstrate this.

A Standing Sustains A Further Blow, But Facts Should Prevail

The Chancellor has sustained another blow to her standing, however, should facts still matter in politics, Badenoch should call off her attack dogs. Perhaps the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will satisfy SW1's thirst for blood.

But the real story is far stranger than the headlines suggest, and stretches wider and further beyond the careers of Starmer and his class of '24. At its heart, this is a story about how much say you and I have over the running of our own country. This should concern you.

First, on to the Core Details

When the OBR published recently some of the projections it provided to Reeves as she prepared the budget, the shock was immediate. Not only has the OBR not acted this way before (described as an "exceptional move"), its numbers seemingly went against Reeves's statements. While rumors from Westminster suggested the grim nature of the budget was going to be, the OBR's own predictions were getting better.

Take the government's so-called "unbreakable" fiscal rule, that by 2030 day-to-day spending for hospitals, schools, and the rest must be completely paid for by taxes: in late October, the OBR calculated it would barely be met, albeit only by a minuscule margin.

A few days later, Reeves held a media briefing so unprecedented that it caused breakfast TV to interrupt its usual fare. Several weeks prior to the actual budget, the country was warned: taxes would rise, and the main reason cited as pessimistic numbers provided by the OBR, specifically its conclusion that the UK had become less efficient, investing more but yielding less.

And lo! It came to pass. Despite what Telegraph editorials combined with Tory broadcast rounds implied over the weekend, that is basically what transpired at the budget, which was big and painful and bleak.

The Misleading Justification

The way in which Reeves misled us was her alibi, because these OBR forecasts did not compel her actions. She could have chosen different options; she might have provided other reasons, including during the statement. Before last year's election, Starmer promised exactly such public influence. "The promise 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 pre-budget speech. The first Labour chancellor in 15 years portrays herself to be an apolitical figure at the mercy of forces beyond her control: "In the context of the long-term challenges on our productivity … any chancellor of any party would be in this position today, confronting the decisions that I face."

She certainly make decisions, just not one Labour wishes to publicize. From April 2029 UK workers as well as businesses will be contributing an additional £26bn annually in tax – but the majority of this will not go towards spent on improved healthcare, new libraries, or enhanced wellbeing. Regardless of what nonsense is spouted by Nigel Farage, Badenoch and their allies, it is not getting splashed on "welfare claimants".

Where the Money Actually Ends Up

Rather than going on services, over 50% of this additional revenue will in fact give Reeves a buffer for her self-imposed budgetary constraints. Approximately 25% goes on paying for the government's own U-turns. Reviewing the watchdog's figures and giving maximum benefit of the doubt to Reeves, a mere 17% of the tax take will fund actual new spending, for example scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury a mere £2.5bn, as it was always an act of theatrical cruelty by George Osborne. A Labour government should have abolished it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform along with all of Blue Pravda have been barking about how Reeves fits the caricature of left-wing finance ministers, soaking strivers to fund shirkers. Party MPs have been cheering her budget for being a relief to their social concerns, protecting the disadvantaged. Each group are completely mistaken: The Chancellor's budget was largely targeted towards asset managers, hedge funds and the others in the bond markets.

The government could present a compelling argument for itself. The forecasts provided by the OBR were too small to feel secure, particularly considering lenders demand from the UK the highest interest rate of all G7 developed nations – exceeding that of France, which lost a prime minister, and exceeding Japan which has way more debt. Coupled with the policies to cap fuel bills, prescription charges as well as train fares, Starmer and Reeves argue this budget allows the central bank to cut its key lending rate.

You can see that those wearing red rosettes might not couch it this way next time they're on the doorstep. As one independent adviser for Downing Street puts it, Reeves has effectively "utilised" the bond market as a tool of discipline over Labour MPs and the voters. It's the reason Reeves can't resign, regardless of which pledges she breaks. It's why Labour MPs must fall into line and support measures to take billions off social security, as Starmer indicated recently.

A Lack of Political Vision and an Unfulfilled Promise

What is absent from this is any sense of statecraft, of harnessing the Treasury and the Bank to reach a new accommodation with markets. Also absent is any innate understanding of voters,