The Budget Buys Starmer And Reeves Some Time
3 min read
The Budget was relatively well received by two audiences: the markets and the Parliamentary Labour Party (PLP). But now Labour MPs nervously wait to see what voters think.
As the dust begins to settle on Rachel Reeves' tax-raising Budget, the general feeling within Labour ranks is that, after a long, tumultuous wait for the Chancellor's House of Commons statement, the big day could have been worse.
"Relief" was how multiple Labour MPs described the mood on Wednesday evening.
The bond markets reacted positively to Reeves doubling her fiscal headroom – the buffer she has before breaching her self-imposed fiscal rules – after several weeks of jittering sparked by speculation, leaks and mixed messages.
"The increased headroom is probably the most important thing, but the least likely thing that people will notice," remarked one Labour MP.
In Westminster, the majority of Labour MPs were pleased with what they saw as a Budget focused on tackling the cost of living and ensuring tax rises fall on broader shoulders.
There was palpable joy over the removal of the two-child benefit cap, with some Labour backbenchers visibly emotional after the Chancellor confirmed that the policy brought in by the Tories in 2017, widely regarded as a major driver of child poverty, would be abolished from April.
John McDonnell, the former shadow chancellor, told Mornings with Ridge and Frost it was a "huge victory" for the left of the party.
In Parliament's Strangers' Bar last night, key figures in the Keir Starmer Downing Street operation, including his chief of staff Morgan McSweeney and political director Amy Richards, as well as cabinet ministers Wes Streeting, John Healey and Jonathan Reynolds, mingled with Labour MPs in an upbeat mood after a torrid few weeks for the government.
However, even Labour MPs who felt that the day was a relative success admit that they are worried about a third audience: the electorate.
“I’m going to be keeping a close eye on the polls over the next few days," one Labour MP told PoliticsHome on Wednesday evening.
There is concern that while Reeves didn't explicitly breach the Labour manifesto promise not to raise income tax, overall tax levels reaching their highest level on record is not an easy sell at a time when government approval ratings are extremely low.
The Office for Budget Responsibility decision to revise down its real terms disposable household income forecast is also awkward for a government that has made tackling the cost of living a core pledge to voters.
Many Labour MPs have concluded that the forecaster should be overhauled, if not abolished, after its extraordinary error of releasing Budget details early on Wednesday.
There is also a minority of Labour MPs who worry that removing the two-child cap, while popular with most of the PLP and Labour members, will be badly received by the public. Earlier this week, one MP complained to PoliticsHome that the government was being “pushed into totemic policy shifts to please its own base, rather than speaking to the country as a whole".
One Labour MP said they feared that, having promised to put "country before party", the Budget looked like the government putting party before country.
What the Budget does seem to have achieved in the short-term, according to Labour MPs who spoke to PoliticsHome after Reeves' Commons statement, is relieving some pressure on Starmer amid intense criticism of his leadership and speculation that he could be ousted.
One Labour backbencher said the Budget had bought Starmer and Reeves time, telling PoliticsHome it was about "survival". Even some loyalist MPs admit, however, that it remains when, not if, the PM leaves No 10 during this parliament.
Additional reporting by Harriet Symonds, Matilda Martin and Zoë Crowther.
