Chancellor Rachel Reeves faces significant criticism from the Conservative Party regarding her management of the UK’s finances, particularly in light of her recent budget announcements. Unsurprisingly, the Conservatives are shooting directly at Reeves. They accuse her of misleadingly portraying the country’s economic record by referring to a £16 billion increase in welfare expenditure as a success. Kemi Badenoch, the rising star of Britain’s ruling Conservative Party, recently put forward an incendiary claim. She accuses him of “lying to the public” about what’s been happening with the nation’s economy.
The situation turned ugly when Conservatives’ new shadow chancellor, Mel Stride, moved to be seen as the hero. He even publicly called on the Financial Conduct Authority to probe Reeves’ financial disclosures in an open letter. Even as the pressure continued to build, Reeves doubled down and insisted that she’d been “transparent” from the start about her plans and decisions.
Over the past few months, almost all has gone wrong for Reeves. These challenges take the form of untangling policy decisions on welfare and the Winter Fuel Allowance tariff implemented in the last half a year. The Office for Budget Responsibility (OBR) has subsequently been forced to revise its projections. They cut the real terms headroom available to Reeves from £9.9 billion in the spring to a measly £4.2 billion by autumn. This downgrade has led Reeves to acknowledge the pressing need for potential tax increases, stating, “I didn’t have an extra £4 billion to play with.”
In reply to Badenoch’s attacks, Reeves made a point of underscoring her choice to end the two-child benefit limit in her budget. Her defense of the action was that it would be paid for by raising online gambling taxes. She argues that this plan would reduce child poverty by over half a million children through addressing tax avoidance and evasion.
“Yes, I did make the decision in the Budget to scrap the two-child [benefit] limit – that was funded by increases on online gambling taxes and also by cracking down on tax avoidance and tax evasion, fully costed and fully funded, and lifting half a million children out of poverty.” – Rachel Reeves
Badenoch’s criticism of Reeves intensified as she called for her resignation, claiming that the Chancellor’s actions were financially irresponsible. Badenoch’s initial argument was that Reeves was increasing taxes in order to pay for welfare handouts with no method to pay for them identified.
“She was raising taxes to pay for welfare – the only thing that was unfunded was the welfare payments that she has made, and she’s doing it on the backs of a lot of people out there who are working very hard and getting poorer – and because of that I believe she should resign.” – Kemi Badenoch
Perhaps in her defense, Reeves then made the case for getting money to implement legislative policy changes. She had publicly articulated this appetite well ahead of this past summer’s arrival. She called making progress on these challenges a prerequisite of being able to stay on top of the state’s public finances.
“I did say when those policies changed just before the summer that we would have to find that money in the Budget, so I was very upfront about that.” – Rachel Reeves
Reeves opened the door to the undeniable reality that the economic landscape has changed drastically. Global instability and large cuts to productivity projections spurred this change.
“I recognise I did not say that in the manifesto but since then we’ve had both a significant downgrade in the productivity forecast but also huge global turbulence.” – Rachel Reeves
As tensions rise over these fiscal debates, Prime Minister Keir Starmer is expected to publicly support Reeves’ budget decisions in an upcoming speech. Starmer’s endorsement should redouble Reeves’ position in the face of constant pressure.