The Most Misleading Aspect of Rachel Reeves's Fiscal Plan? Who It Was Truly Aimed At.

The allegation is a serious one: that Rachel Reeves may have misled UK citizens, scaring them to accept massive additional taxes that could be used for increased welfare payments. However exaggerated, this is not typical Westminster bickering; on this occasion, the stakes are higher. Just last week, critics aimed at Reeves alongside Keir Starmer had been calling their budget "a shambles". Today, it is denounced as lies, and Kemi Badenoch demanding Reeves to step down.

Such a serious charge requires clear answers, so let me provide my assessment. Has the chancellor tell lies? On current evidence, apparently not. She told no whoppers. But, despite Starmer's recent remarks, it doesn't follow that there's no issue here and we can all move along. The Chancellor did misinform the public regarding the factors informing her decisions. Was this all to channel cash towards "welfare recipients", like the Tories assert? No, and the figures prove it.

A Reputation Takes A Further Blow, But Facts Must Win Out

The Chancellor has sustained a further blow to her reputation, but, if facts still matter in politics, Badenoch should call off her attack dogs. Perhaps the resignation yesterday of OBR head, Richard Hughes, due to the leak of its internal documents will quench Westminster's thirst for blood.

But the real story is far stranger than the headlines suggest, and stretches wider and further beyond the political futures of Starmer and the 2024 intake. At its heart, this is an account about how much say the public get in the governance of our own country. And it should worry everyone.

First, to Brass Tacks

When the OBR published recently some of the forecasts it shared with Reeves while she wrote the budget, the shock was immediate. Not merely has the OBR not done such a thing before (an "exceptional move"), its figures seemingly contradicted the chancellor's words. Even as rumors from Westminster suggested the grim nature of the budget would have to be, the watchdog's predictions were getting better.

Consider the Treasury's so-called "iron-clad" rule, that by 2030 day-to-day spending for hospitals, schools, and other services must be wholly paid for by taxes: in late October, the OBR reckoned this would just about be met, albeit by a minuscule margin.

A few days later, Reeves held a media briefing so extraordinary that it caused morning television to interrupt its regular schedule. Weeks prior to the actual budget, the country was put on alert: taxes would rise, with the main reason being pessimistic numbers provided by the OBR, specifically its conclusion suggesting the UK had become less productive, investing more but yielding less.

And lo! It happened. Notwithstanding what Telegraph editorials and Tory broadcast rounds suggested recently, this is essentially what happened at the budget, which was big and painful and bleak.

The Misleading Alibi

Where Reeves deceived us was her justification, since these OBR forecasts didn't force her hand. She could have chosen different options; she could have given other reasons, even on budget day itself. Before the recent election, Starmer pledged exactly such public influence. "The hope of democracy. The strength of the vote. The potential for national renewal."

One year later, yet it is powerlessness that is evident from Reeves's breakfast speech. The first Labour chancellor in 15 years portrays herself to be an apolitical figure buffeted by forces beyond her control: "Given the circumstances of the persistent challenges on our productivity … any finance minister of any party would be standing here today, facing the choices that I face."

She did make decisions, only not one Labour cares to publicize. Starting April 2029 UK workers and businesses are set to be contributing another £26bn annually in taxes – and the majority of this will not be spent on improved healthcare, new libraries, or enhanced wellbeing. Whatever nonsense is spouted by Nigel Farage, Badenoch and their allies, it is not getting splashed on "benefits street".

Where the Money Really Goes

Rather than being spent, over 50% of this extra cash will instead give Reeves a buffer against her self-imposed fiscal rules. About 25% is allocated to covering the administration's U-turns. Reviewing the OBR's calculations and giving maximum benefit of the doubt towards a Labour chancellor, only 17% of the tax take will fund actual new spending, such as 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 from George Osborne. This administration should have abolished it in its first 100 days.

The True Audience: Financial Institutions

Conservatives, Reform along with all of Blue Pravda have spent days railing against how Reeves fits the caricature of left-wing finance ministers, soaking strivers to spend on the workshy. Labour backbenchers are cheering her budget as a relief to their social concerns, safeguarding the most vulnerable. Each group could be 180-degrees wrong: Reeves's budget was largely targeted towards asset managers, speculative capital and the others in the bond markets.

The government could present a compelling argument for itself. The margins from the OBR were insufficient for comfort, particularly given that bond investors demand from the UK the highest interest rate among G7 developed nations – exceeding that of France, which lost a prime minister, and exceeding Japan that carries far greater debt. Combined with our policies to cap fuel bills, prescription charges and train fares, Starmer together with Reeves can say their plan allows the central bank to cut interest rates.

You can see why those folk with red rosettes might not couch it this way when they're on the doorstep. As one independent adviser for Downing Street puts it, Reeves has "utilised" financial markets as a tool of control against Labour MPs and the voters. This is why Reeves can't resign, no matter what pledges she breaks. It's the reason Labour MPs will have to fall into line and vote that cut billions from social security, as Starmer promised recently.

A Lack of Statecraft and an Unfulfilled Promise

What is absent from this is the notion of statecraft, of mobilising the Treasury and the Bank to reach a fresh understanding with markets. Missing too is any innate understanding of voters,