As Labour Chancellor Rachel Reeves prepares to deliver the party’s first budget in 14 years, the stakes couldn’t be higher. With the UK facing significant fiscal challenges inherited from the previous Conservative government, Reeves finds herself walking a tightrope between restoring economic stability and risking political backlash.
Clearing the Decks of Tory Fiscal Mess
Reeves’ first task is to address the dire fiscal legacy left by the Conservatives. National debt as a proportion of GDP is at its highest level since the early 1960s, while the tax burden has reached a peak not seen since the late 1940s. The chancellor is expected to argue that tough decisions are necessary to fix the fictional fiscal plans bequeathed by the previous mismanagement.
Ghosts of Truss and Kwarteng Haunt the Treasury
The disastrous mini-budget of 2022, authored by then-Prime Minister Liz Truss and Chancellor Kwasi Kwarteng, still haunts the corridors of the Treasury. Their unfunded tax cuts triggered a meltdown in the bond markets, and Reeves is determined to avoid a repeat of that catastrophe. According to inside sources, she is likely to be cautious about relaxing rules on government borrowing, wary of spooking investors.
Cabinet Tensions and Backbench Jitters
However, Reeves also faces dissent from within her own party. Several cabinet ministers, including Deputy Prime Minister Angela Rayner and Justice Secretary Shabana Mahmood, have reportedly written to Prime Minister Starmer protesting planned cuts to their departments. Labour backbenchers, many of whom joined politics to help the disadvantaged and improve public services, are also nervous about the budget’s impact.
It’s massive. Hugely important. It sets the course for the rest of the parliament.
– Anonymous Cabinet Minister
Balancing Tough Choices and Crowd-Pleasers
Reeves is attempting a delicate balancing act. She is pre-selling the budget as a “wiping the slate clean” event, with up to £40 billion in tax hikes and spending cuts. At the same time, there is pressure to include some crowd-pleasing measures to sweeten the pill, especially given Labour’s sliding approval ratings since taking office.
- NHS Boost: The health service is expected to receive additional resources, partly to help address record waiting lists. Reeves will likely use this to justify tax increases.
- Benefit Battles: There are growing demands within Labour to abandon cuts to disability benefits pencilled in by the Tories. A rebellious vote against means-testing the winter fuel allowance for pensioners also signals potential flashpoints.
Earning Respect Through Tough Choices
With no chance of pleasing everyone, Reeves’ aim is to earn respect for having the courage to make difficult decisions to put the UK on a firmer economic footing. She hopes that memories of the mess inherited from the Tories, combined with the long lead time until the next election, will give her the political space to take bitter medicine now in service of future prosperity.
Her aim is to win some respect for being willing to make tough choices to put Britain on a firmer footing for the future. What her more anxious colleagues fear is a budget that ends up satisfying no one while aggravating everyone.
– Andrew Rawnsley, Chief Political Commentator of the Observer
The stakes are immense, both for Reeves’ personal credibility and for the wider Starmer-Reeves project of reshaping Labour as a fiscally responsible party of government. Land the budget well and the chancellor will settle economic nerves and establish a new direction for the country. Mishandle it and the unravelling of recent weeks risks turning into a full-blown crisis. For Reeves and Labour, it’s a defining moment.
