Rachel Reeves, the new Chancellor, is preparing for her big debut. She’s set to unveil her second budget this coming Wednesday. But now, with final numbers for this landmark budget just in, Reeves is left holding the bag and facing withering accountability and criticism. Her agenda focuses on three top priorities: reducing the cost of living, addressing NHS waiting lists, and cutting the national debt.
Her upcoming budget presentation is make-or-break for her political future. Just as important is its significance for the Labour Party, which finds itself deeply divided, hugely unpopular with its own backbenchers, and mired in its own leadership struggles. Reeves’s team is clearly poised to address these priorities head on. They think she can do magic to push the limits imposed by Labour’s policy choices, contract negotiations etc.
Reeves became one the first major candidates to begin her budget planning back in July, conducting her first economic roundtable in her future Treasury Department office. She bird-dogged the discussion from the get-go, starting with an audacious move. She turned her back on conventional preparation approaches and shouldered the goal of ruling out spreadsheets and Treasury scorecards. Rather than going the route of grand pledges and presentations, Reeves wrote out her top three priorities in a clear bullet-pointed list on A5 Treasury headed paper.
Yet her mission has been complicated by past political choices that have apparently weakened Labour’s hand. Earlier this year, she was compelled to abandon proposed cuts to the winter fuel allowance set for 2024, as well as welfare reforms. As an example, shortly after taking office last year, she increased taxes on oil and gas companies. Now, she needs to meet that challenge by focusing this tax on the firms that remain in the North Sea.
With the exception of the House Majority, political fortunes empower fellow travelers to sink Reeves’s budget efforts even further. She faces a government that struggles with public approval and dissatisfaction among party members, making her job even more challenging. As one senior Labour figure noted, “Everyone accepts we inherited a bad position.”
Beyond dealing with short term fiscal crises, progressives in her own party are demanding more radical reforms. “They need to increase the headroom, do something big on energy costs, and they have to do something for the soft left on [the] two-child cap – they have walked people up the hill,” said one senior MP.
As the budget process has unfolded over several months, observers have noted a fragile economic environment that requires careful navigation. Lord Bridges commented on the precarious situation, stating: “This is not a fiscal buffer; it is a fiscal wafer, so thin and fragile that it will snap at the slightest tap.”
Despite these challenges, Reeves’s confidence appears unshaken. Her team believes that with strategic planning and a clear focus on her priorities, she can deliver a budget that aligns with Labour’s goals while addressing pressing national issues.