Rachel Reeves’s tax-raising Budget is as exhaustively previewed as any Hollywood blockbuster movie sequel.
It will look familiar, if you have sat through the trailers, as the retreat from “no major tax rises” commitments in the Labour manifesto has been hinted at in leaks over the past month.
The aim of this slow reveal was to dilute the blowback to a breach of bad faith with the voters over the promise not to raise the three main taxes before the election. Technically, that can be avoided by (for instance) freezing income tax thresholds rather than raising the main rates directly. Practically, large swathes of the public will feel the brunt of rises in areas they cannot avoid.
This prospect has been tortuous for Labour MPs who have to defend the volte face on a thin bench of excuses, ranging from the Ukraine war raising energy and living costs (entirely foreseeable at the time of the election) to a bad international trade outlook (also predictable, given the 50 per cent chance Donald Trump would get another term in the White House).
Political management has become the anxious undertow of this government reeling from internal rows over personnel and direction. It also explains why Reeves has rushed into an abolition of the two-child benefit cap which she did not originally intend to tackle so sweepingly or so soon. Her shift will be a moment of triumph for Labour backbenchers, who have moved the Chancellor to abolition of the stringent cap – at a cost of £3bn yearly.
The trap here is that the cheers expected to be heard when this measure is announced are not widely shared by the public – benefit levels are areas where the Government has markedly more support from Labour voters that the public at large. Around three-fifths of those polled think that the cap is a good thing, or that the resource spent on lifting it could be better used elsewhere.
Reeves herself has changed priorities in the wake of a defeat over welfare and benefit reforms in July which left her authority reeling and created doubt about whether she has a remedy for a cost spiral in spending when the economy is not raising the money to fund it.
As much as Reeves will hope that a gesture to support needy children will provide a “Labour budget” to hearten MPs, the far bigger reverberation will be as a result of her distribution of tax-raising measures – more pensioners will be dragged into taxation or higher tax brackets along with many higher earners.
A late entrant into the “how to tax it” charts is a proposal to tax the mileage use of electric vehicles, at the same time as a discount scheme to urge electric new-car purchases – a degree of confusion does hallmark a lot of Reeves’s “smorgasbord” measures and that sets her up for a lot of criticism from various rankled groups after Wednesday.
Whatever the final cut of this tax-raising horror movie for a Chancellor, it all feels more like the emergency Budget Reeves should have given on entering No 11 than the plan for growth a year later.
A lot less clear is how it pushes any great leap forward for UK growth; that, after all, was the single most important priority highlighted by Starmer and Reeves as their north star. It is hardly a secret that Reeves has been under immense political and personal pressure: she still looks somewhat traumatised after the trouncing of her £5bn welfare savings plan in July.
The vaunted gradualist return to this topic through a panoply of government commissions to reboot the welfare system is not likely to yield big savings any time soon, which means she has caved in on benefits before overhauling a welfare system she admits is too costly.
Reeves has sought to redefine her own appeal – talking in interviews about being “mansplained” to (risky if your Prime Minister boss is male) and underestimated as a bright comprehensive school girl. In the past, she has taken umbrage at someone patronising her in the admissions procedure for Oxford. This plaintive story-telling is genuine – she does believe that opportunity is limited in class terms – though this is always a difficult road for a politician to embark on before a Budget. It feels a bit too “this is me” – when voters are more worried about themselves.
Personally, one can have some sympathy with her position and its tensions: after all, it is Starmer who chose her as his de facto running mate and whose grip on the raw politics benefits and taxation in the era of a Reform UK surge looks pretty weak too.
A cynic might wonder if the relentless Keir-miles global engagement prevents him being on the ground at home long enough to catch the flak for unpopular decisions his Chancellor will present on Wednesday. The two have never quite gelled as a duo united behind one clear direction and message, which means that Reeves bears the brunt of the fiscal uncertainty and generally worried economic mood at home.
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This might also account for the injured tone that she has projected – she has also just had a big internal team reorganisation, aimed at connecting her mission better to the scrappy and contested power structures in Number 10.
A range of tax raids will be a reminder that this is essentially a fiscal event which needs to address the weakness or over-optimism of the Chancellor’s original vision. Forestalling the markets raising the cost of UK debt is a necessity when you have already made policy errors: not a bold vision for Britain’s recovery. And not everyone on Reeves’ own side is convinced that spending cuts to fund an increase in benefits is the best use of limited resources or messaging to swing voters.
In extremis, ministers and back benchers will rally around her. But the backroom talk of others – now including the steadfast Defence Secretary John Healey – positioning themselves as her potential successor, is unstoppable chatter. One admirable aspect of Reeves is that she is, as a staffer puts it “up for the fightback”. A growing number of her colleagues nonetheless think it looks more like a swansong than a revival.
Anne McElvoy is executive editor of Politico and host of the Politics at Sam and Anne’s podcast
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