The Biggest Inaccurate Part of the Chancellor's Economic Statement? The Real Audience Really Aimed At.

This accusation is a serious one: suggesting Rachel Reeves may have deceived the British public, frightening them into accepting massive extra taxes which would be spent on increased benefits. However hyperbolic, this is not usual Westminster sparring; on this occasion, the consequences are more serious. A week ago, detractors aimed at Reeves alongside Keir Starmer were calling their budget "disorderly". Today, it's denounced as lies, with Kemi Badenoch demanding the chancellor to quit.

Such a grave accusation requires straightforward responses, therefore let me provide my view. Did the chancellor tell lies? Based on the available evidence, apparently not. She told no major untruths. But, notwithstanding Starmer's recent remarks, it doesn't follow that there's nothing to see and we can all move along. The Chancellor did misinform the public regarding the considerations informing her decisions. Was it to funnel cash towards "benefits street", like the Tories assert? Certainly not, and the figures demonstrate this.

A Standing Takes A Further Blow, Yet Truth Should Prevail

Reeves has taken another hit to her reputation, but, should facts still have anything to do with politics, Badenoch should call off her attack dogs. Maybe the resignation recently 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 true narrative is much more unusual compared to the headlines indicate, extending wider and further beyond the political futures of Starmer and the 2024 intake. At its heart, this is an account concerning what degree of influence you and I have over the running of the nation. And it should worry everyone.

Firstly, to the Core Details

After the OBR released last Friday a portion of the forecasts it provided to Reeves as she prepared the red book, the surprise was immediate. Not only has the OBR not acted this way before (an "unusual step"), its numbers apparently contradicted Reeves's statements. Even as rumors from Westminster were about how bleak the budget was going to be, the watchdog's predictions were improving.

Take the government's most "iron-clad" rule, stating by 2030 daily spending on hospitals, schools, and the rest must be completely funded by taxes: in late October, the watchdog reckoned it would barely be met, albeit only by a tiny margin.

Several days later, Reeves gave a media briefing so extraordinary that it caused morning television to break from its regular schedule. Weeks prior to the actual budget, the country was warned: taxes would rise, and the main reason being pessimistic numbers from the OBR, specifically its finding suggesting the UK had become less productive, putting more in but yielding less.

And lo! It came to pass. Despite the implications from Telegraph editorials combined with Tory media appearances suggested recently, that is basically what happened during the budget, which was significant, harsh, and grim.

The Deceptive Alibi

The way in which Reeves misled us was her justification, because these OBR forecasts did not compel her actions. She might have chosen other choices; she could have given other reasons, including during the statement. Before last year's election, Starmer promised precisely this kind of people power. "The hope of democracy. The strength of the vote. The potential for national renewal."

A year on, and it is a lack of agency that is evident from Reeves's breakfast speech. Our first Labour chancellor for a decade and a half casts herself as a technocrat at the mercy of factors beyond her control: "In the context of the persistent challenges with our productivity … any chancellor of any party would be standing here today, facing the decisions that I face."

She certainly make a choice, just not one Labour cares to publicize. Starting April 2029 UK workers and businesses are set to be paying another £26bn annually in tax – and most of that will not go towards spent on better hospitals, public services, or enhanced wellbeing. Whatever bilge comes from Nigel Farage, Badenoch and others, it isn't getting splashed on "benefits street".

Where the Money Really Goes

Rather than being spent, over 50% of this extra cash will in fact provide Reeves a buffer against her own budgetary constraints. Approximately 25% goes on paying for the government's own policy reversals. Reviewing the OBR's calculations and giving maximum benefit of the doubt to a Labour chancellor, a mere 17% of the taxes will go on genuinely additional spending, for example scrapping the two-child cap on child benefit. Its abolition "costs" the Treasury only £2.5bn, because it had long been a bit of theatrical cruelty from George Osborne. This administration should have have binned it immediately upon taking office.

The True Audience: Financial Institutions

The Tories, Reform and all of Blue Pravda have been barking about the idea that Reeves fits the caricature of Labour chancellors, taxing hard workers to spend on shirkers. Labour backbenchers are cheering her budget as balm to their troubled consciences, safeguarding the disadvantaged. Both sides are completely mistaken: Reeves's budget was primarily aimed at asset managers, hedge funds and the others in the bond markets.

Downing Street could present a compelling argument in its defence. The forecasts provided by the OBR were too small for comfort, particularly given that bond investors charge the UK the greatest borrowing cost of all G7 developed nations – exceeding that of France, which lost a prime minister, and exceeding Japan that carries way more debt. Combined with the measures to cap fuel bills, prescription charges and train fares, Starmer and Reeves can say this budget enables the central bank to cut interest rates.

It's understandable that those folk with red rosettes may choose not to frame it this way next time they visit #Labourdoorstep. As a consultant for Downing Street says, Reeves has effectively "utilised" the bond market to act as an instrument of control over Labour MPs and the electorate. It's why Reeves can't resign, no matter what pledges she breaks. It is also why Labour MPs must fall into line and vote to take billions off social security, as Starmer promised yesterday.

Missing Political Vision and a Broken Pledge

What is absent from this is the notion of strategic governance, of harnessing the Treasury and the Bank to reach a new accommodation with investors. Also absent is any intuitive knowledge of voters,