The Most Misleading Part of Rachel Reeves's Budget? Who It Was Really Intended For.

This allegation carries significant weight: that Rachel Reeves has misled the British public, frightening them to accept billions in additional taxes which could be funneled into increased welfare payments. While exaggerated, this isn't typical Westminster sparring; on this occasion, the stakes could be damaging. Just last week, detractors of Reeves and Keir Starmer were calling their budget "a shambles". Now, it's branded as falsehoods, and Kemi Badenoch calling for Reeves to step down.

This serious charge requires straightforward answers, therefore here is my assessment. Did the chancellor been dishonest? On current evidence, no. She told no blatant falsehoods. However, notwithstanding Starmer's recent remarks, it doesn't follow that there is nothing to see and we should move on. Reeves did mislead the public about the considerations shaping her choices. Was this all to channel cash towards "welfare recipients", like the Tories assert? Certainly not, as the numbers demonstrate it.

A Standing Takes Another Blow, But Facts Should Prevail

The Chancellor has sustained a further blow to her standing, however, if facts still matter in politics, Badenoch ought to call off her lynch mob. Maybe the resignation recently of the Office for Budget Responsibility (OBR) chief, Richard Hughes, due to the leak of its own documents will satisfy SW1's appetite for scandal.

But the real story is much more unusual than the headlines indicate, extending wider and further beyond the careers of Starmer and his 2024 intake. Fundamentally, herein lies a story about what degree of influence the public get in the running of the nation. This should concern everyone.

Firstly, to Brass Tacks

After the OBR published last Friday some of the forecasts it shared with Reeves as she wrote the budget, the surprise was immediate. Not only has the OBR not done such a thing before (an "unusual step"), its figures apparently went against Reeves's statements. Even as rumors from Westminster were about the grim nature of the budget was going to be, the OBR's own predictions were getting better.

Take the Treasury's so-called "iron-clad" fiscal rule, stating by 2030 daily spending for hospitals, schools, and the rest must be wholly funded by taxes: in late October, the watchdog calculated this would barely be met, albeit only by a minuscule margin.

Several days later, Reeves held a media briefing so unprecedented that it caused breakfast TV to interrupt its regular schedule. Several weeks before the actual budget, the country was put on alert: taxes would rise, and the main reason cited as pessimistic numbers from the OBR, in particular its conclusion suggesting the UK had become less productive, putting more in but yielding less.

And so! It came to pass. Notwithstanding what Telegraph editorials and Tory media appearances implied over the weekend, this is essentially what transpired during the budget, which was significant, harsh, and grim.

The Deceptive Justification

Where Reeves deceived us concerned her justification, because those OBR forecasts didn't compel her actions. She might have chosen other choices; she could have given alternative explanations, including on budget day itself. Prior to the recent election, Starmer pledged exactly such people power. "The promise of democracy. The strength of the vote. The possibility for national renewal."

A year on, and it is powerlessness that is evident from Reeves's pre-budget speech. The first Labour chancellor for a decade and a half portrays herself as an apolitical figure buffeted by factors outside her influence: "In the context of the long-term challenges on our productivity … any chancellor of any party would be in this position today, confronting the choices that I face."

She certainly make decisions, only not the kind Labour cares to broadcast. Starting April 2029 British workers as well as businesses are set to be paying another £26bn a year in tax – but the majority of this will not go towards spent on better hospitals, public services, nor happier lives. Whatever bilge is spouted by Nigel Farage, Badenoch and their allies, it is not being lavished upon "benefits street".

Where the Money Really Goes

Instead of being spent, more than 50% of the additional revenue will in fact give Reeves a buffer for her own budgetary constraints. Approximately 25% is allocated to covering the government's own U-turns. Reviewing the OBR's calculations and being as generous as possible towards a Labour chancellor, only 17% of the tax take will go on actual new spending, for example scrapping the two-child cap on child benefit. Its abolition "will cost" the Treasury only £2.5bn, as it was always an act of political theatre by George Osborne. A Labour government could and should have binned it immediately upon taking office.

The Real Target: The Bond Markets

Conservatives, Reform and the entire right-wing media have spent days railing against the idea that Reeves conforms to the caricature of Labour chancellors, taxing strivers to fund shirkers. Party MPs have been applauding her budget for being a relief for their social concerns, protecting the disadvantaged. Each group are completely mistaken: Reeves's budget was primarily targeted towards asset managers, hedge funds and participants within the financial markets.

Downing Street could present a compelling argument for itself. The margins from the OBR were too small to feel secure, especially given that bond investors charge the UK the highest interest rate of all G7 developed nations – higher than France, that recently lost a prime minister, higher than Japan that carries far greater debt. Coupled with our measures to hold down fuel bills, prescription charges and train fares, Starmer together with Reeves argue this budget enables the Bank of England to reduce its key lending rate.

You can see why those wearing red rosettes might not couch it this way when they're on #Labourdoorstep. According to a consultant to Downing Street puts it, Reeves has effectively "utilised" the bond market to act as an instrument of discipline over Labour MPs and the electorate. It's the reason Reeves cannot resign, regardless of which pledges she breaks. It's why Labour MPs will have to knuckle down and vote that cut billions from social security, as Starmer indicated recently.

Missing Statecraft , an Unfulfilled Promise

What is absent from this is the notion of statecraft, of harnessing the finance ministry and the Bank to forge a new accommodation with markets. Also absent is any intuitive knowledge of voters,