Martin Kettle, The Guardian.
The chancellor’s statement will be remembered for the many taxes it raised, rather than the big one – income tax – it did not.
Rachel Reeves’s chancellorship was already balanced on a knife-edge, even before the 2025 budget. After she delivered her second budget statement, it still is. Even more than usual, Wednesday’s speech was full of significant fiscal changes, altered spending commitments and adjusted economic forecasts, most of them accidentally (and, for journalists, conveniently) released a short while in advance by the obviously misnamed Office for Budget Responsibility. Politically, however, almost nothing has changed at all.
Reeves arrived in the Treasury last year offering what she, like Keir Starmer, had promised as the Conservative years ebbed: competence, stability and, above all, a focus on economic growth. Her problem, despite her upbeat assessments, is that she has delivered none of them. Nothing about the 2025 budget guarantees any early change in that, however defiantly Reeves spoke about reversing the OBR’s reduced new growth and productivity forecasts.
No one is more aware of the dispirited national mood than Reeves herself. In her pre-budget video, she acknowledged the public’s continuing frustration and anger. What she did not acknowledge – although she is painfully aware of it in private and it shaped big parts of her budget – was that the same frustration and anger that carried Labour into government is now threatening to sweep Labour out of it again.
Only an incorrigible Labour optimist – and there are very few of these at the moment – could say the 2025 budget has calmed those feelings, let alone laid them to rest. In some respects, indeed, the 2025 budget has made things worse, and not simply because of the many tax rises which, do not delude yourself, are never popular. All this will be overstated by a largely hostile press, but it seems inevitable that the 2025 budget will be remembered for the many taxes Reeves put up, rather than for the big one, income tax, that in the end she did not.https://interactive.guim.co.uk/datawrapper/embed/0VCTp/1/?dark=false
Between now and Christmas, political and media focus will be on whether Wednesday’s complex mix of new duties, stealth taxes and public spending hikes can cut it with the public, the bond markets and the Labour party. The budget blowbacks experienced in the past by chancellors such as Gordon Brown and George Osborne should remind all of them to expect the unintended. My own tuppenceworth is that higher taxes on private pension contributions may deter savings and boost consumer spending in quite significant ways for the economy.
Right now, it is still the Labour party, particularly its fearful MPs and its candidates facing tough elections next May, that matters most in political terms. The backbenches seemed to welcome most of what Reeves announced – the end of the two-child benefit cap in particular. Hardly surprising this, since this became a budget designed to calm a fractious Labour party, not one aimed at swing voters in marginal seats. This remains a very vulnerable time for both Reeves and Starmer. Their party still holds a lot of power over them.
This budget will not merely define Reeves’s career and Labour’s prospects. Anyone with good sense in Whitehall should use what happened in this budget to force a comprehensive rethink of the whole budget preparation process. The OBR’s humiliating premature launch was merely the last straw for a more general failure. The long run-in to a very late budget meant a loss of good decision-making. The official strategy of pre-budget leaking is also completely out of hand. It is disreputable, insults parliament, stokes public contempt, empowers journalists to speculate not report and weakens the chancellor’s authority. The 2025 experience has been an object lesson in how not to do things. It should be the last budget of this kind.
A lot of these issues predate Reeves’s chancellorship. Yet it remains her responsibility. Her own original sin remains the irresponsible pre-election commitment not to raise the three key personal taxes in this parliament. This underlay the undignified on-again, off-again mixed messages in this year’s drawn-out pre-budget period. It also implied she did not know what she was doing. That judgment is boosted by the fact that lifting the child benefit relief cap sits awkwardly with Reeves’s previous protestations of fiscal prudence. A budget that pleases most of the Labour party in its fissiparous current state is probably a budget with something pretty seriously amiss with it.
By Reeves’s own rather modest standards, her speech was decent performative politics. The content may have been grim, but the shape of the statement was smart. There were one or two jokes and some sharp back-and-forth with the opposition. None of this will have harmed her with the Labour benches. But she plainly does not command the Commons as a more powerful chancellor ought to do. Though one accepts that all too few modern ministers of all political tribes seem capable of doing this, it is still a weakness which limits her authority to do difficult things.
The late Nigel Lawson used to say that, for all the indefensible absurdity of the British budget rituals and traditions, they nevertheless mean that, for one day of the year, more or less the entire nation is at least united in thinking about the economy. The problem for Reeves is that Lawson was right. As Hugo Young once wrote in these pages, budget day is the day when a chancellor does not have a single alibi. In volatile political times like ours, that is unlikely to be good news for Reeves.
