The Biggest Deceptive Element of Rachel Reeves's Fiscal Plan? Who It Was Really Aimed At.
The charge represents a grave matter: that Rachel Reeves has misled the British public, spooking them to accept massive additional taxes which could be funneled into increased benefits. However exaggerated, this is not typical political bickering; this time, the consequences are more serious. A week ago, critics aimed at Reeves and Keir Starmer had been calling their budget "a mess". Today, it's branded as falsehoods, with Kemi Badenoch calling for the chancellor's resignation.
Such a serious charge demands clear responses, therefore here is my assessment. Did the chancellor been dishonest? On the available evidence, apparently not. There were no major untruths. But, notwithstanding Starmer's yesterday's remarks, it doesn't follow that there is no issue here and we should move on. Reeves did misinform the public about the factors shaping her decisions. Was it to channel cash to "welfare recipients", as the Tories assert? Certainly not, and the numbers demonstrate this.
A Standing Takes A Further Hit, But Facts Should Prevail
The Chancellor has taken another hit to her standing, but, should facts continue to matter in politics, Badenoch ought to stand down her attack dogs. Maybe the resignation yesterday of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the unauthorized release of its own documents will quench Westminster's thirst for blood.
Yet the real story is far stranger than media reports indicate, and stretches broader and deeper beyond the political futures of Starmer and his class of '24. Fundamentally, this is a story concerning how much say you and I get in the running of our own country. And it should worry everyone.
Firstly, on to Brass Tacks
After the OBR published last Friday a portion of the forecasts it provided to Reeves while she prepared the budget, the shock was instant. Not only had the OBR never done such a thing before (described as an "rare action"), its figures apparently contradicted Reeves's statements. Even as leaks 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 daily spending on hospitals, schools, and the rest must be completely funded by taxes: at the end of October, the watchdog calculated this would just about be met, albeit by a minuscule margin.
Several days later, Reeves held a media briefing so unprecedented that it caused morning television to interrupt its regular schedule. Weeks before the actual budget, the nation was put on alert: taxes were going up, and the primary cause being pessimistic numbers from the OBR, specifically its conclusion that the UK was less productive, putting more in but yielding less.
And lo! It happened. Notwithstanding the implications from Telegraph editorials and Tory media appearances suggested recently, that is basically what transpired during the budget, which was big and painful and bleak.
The Deceptive Justification
The way in which Reeves misled us was her justification, because those OBR forecasts didn't compel her actions. She could have chosen other choices; she might have given alternative explanations, including during the statement. Prior to last year's election, Starmer promised precisely this kind of public influence. "The promise of democracy. The strength of the vote. The potential for national renewal."
One year later, and it is a lack of agency that jumps out in Reeves's breakfast speech. Our first Labour chancellor in 15 years casts herself to be a technocrat at the mercy of factors beyond her control: "Given the circumstances of the long-term challenges on our productivity β¦ any finance minister of any party would be in this position today, confronting the choices that I face."
She certainly make a choice, only not one Labour wishes to publicize. Starting April 2029 UK workers as well as businesses will be paying an additional Β£26bn annually in tax β and the majority of this will not be spent on improved healthcare, new libraries, nor enhanced wellbeing. Regardless of what nonsense comes from Nigel Farage, Badenoch and others, it is not being lavished upon "welfare claimants".
Where the Money Actually Ends Up
Instead of going on services, over 50% of this additional revenue will in fact give Reeves cushion against her own budgetary constraints. Approximately 25% is allocated to paying for the administration's policy reversals. Examining the watchdog's figures and being as generous as possible to Reeves, a mere 17% of the taxes will fund actual new spending, for example scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury a mere Β£2.5bn, because it was always a bit of political theatre from George Osborne. A Labour government could and should abolished it immediately upon taking office.
The Real Target: The Bond Markets
The Tories, Reform and all of Blue Pravda have spent days railing against the idea that Reeves conforms to the caricature of Labour chancellors, taxing strivers to spend on the workshy. Labour backbenchers are cheering her budget for being balm to their social concerns, protecting the most vulnerable. Both sides could be completely mistaken: Reeves's budget was largely targeted towards investment funds, hedge funds and the others in the financial markets.
The government could present a compelling argument for itself. The forecasts provided by the OBR were too small for comfort, especially given that bond investors demand from the UK the greatest borrowing cost among G7 developed nations β higher than France, which lost its leader, higher than Japan that carries way more debt. Combined with the policies to cap fuel bills, prescription charges as well as train fares, Starmer together with Reeves can say their plan allows the central bank to reduce interest rates.
It's understandable why those folk with red rosettes may choose not to couch it this way next time they visit #Labourdoorstep. According to a consultant to Downing Street says, Reeves has effectively "weaponised" financial markets to act as an instrument of control over her own party and the voters. It's the reason the chancellor can't resign, regardless of which pledges she breaks. It's the reason Labour MPs must fall into line and vote that cut billions from social security, as Starmer promised recently.
Missing Statecraft and a Broken Pledge
What's missing here is the notion of statecraft, of harnessing the finance ministry and the Bank to reach a fresh understanding with markets. Missing too is innate understanding of voters,
