by On Saturday Keir Starmer and his government were in office for 100 difficult days. Riots on the far right, rows between the top officers in No. 10, anger at freedom in an administration that claims to be in the service of the nation. Starmer now refers to them as “elite days”, and the last two as “sidewinds” he insists will not derail him.
For cabinet ministers in big spending departments, further frustrations have emerged since they celebrated a landslide win on July 4. Waiting for the budget. New governments – Labor in 1997, and the Lebanese Tory/Democrat coalition in 2010 – tend to hold their first budgets in double time to set direction and establish a clear sense of purpose.
This Labor government’s first budget will not happen until almost four months after it comes to power, on 30 October. Under the fiscal transparency system Labor decided to restore confidence after Liz Truss, the Office for Budget Responsibility had to be given time to look at the figures, make forecasts and check everything. While ambitious cabinet members are pulling their hair out.
Reeves, they say, has locked herself in the Treasury, worrying about what to do. “We can’t be close to her,” said one cabinet colleague. “We can’t get past Darren,” they said, referring to Darren Jones, the chief secretary to the Treasury, who is Reeves’ effective second-in-command.
Amidst the turmoil of meetings and, some would say, a lack of clear direction, cabinet ministers are eager to make announcements or float the slightest of ideas. But without knowing if they will be given money to do that, in the budget or in the next spring’s expenditure review, it was not possible. “We are all quite restrained. It’s a problem,” said one.
When Reeves succeeds in delivering the first budget from a female chancellor in this country’s history, it will be a huge moment in other ways too.
No new occupant of the post can face so many competitive challenges. One can blame it all – not least the £22bn black hole in the public finances she inherited – on 14 years of Tory government. Others, more strategic and tactical, are Labor’s own. They have put themselves in boxes.
Before the election, to convince voters that it would be fiscally responsible, Labor promised to be bound by strict fiscal rules on future spending and investment.
The party promised not to raise taxes on working people so they failed to increase their income tax, VAT or national insurance. He also promised to stimulate new growth and create the fastest growing economy in the G7.
The promises didn’t end there. Since the election Starmer has repeatedly said that there will be no Tory recovery and no widespread cuts to public services.
Now is the time to start delivering growth and fixing public services and not raising working people’s taxes only 17 days away.
One former Tory cabinet minister put it this way: “They have said they will not go back to austerity and rebuild services without raising tax on working people, but they will have to find money from somewhere.
“We are talking large sums. The Institute for Fiscal Studies says they need to raise £25bn in taxes. But if they are to achieve that and stick to their promises all the choices will be very difficult.
“They made life much harder for themselves because they ruled out raising income tax, VAT or national insurance for working people. Between them that represents about 75% of all income.”
He added: “They went into the run-up to the election saying it would all come from economic growth, but that wasn’t really sustainable because you can never count on growth.”
So with the government’s credibility on the line, where will Reeves go to raise the money?
Related: Tax wealth and value of public assets: how Reeves can solve her biggest budget challenges
First, she is widely expected to change the fiscal rules to allow longer-term borrowing for investment. Some people believe that this could be worrying for the financial markets if it is not clearly stated that there would be a strict limit on that loan.
It is expected in Whitehall that Reeves will raise many billions by raising employers’ national insurance contributions, after Starmer refused to rule this out at prime minister’s questions on Wednesday.
Challenged by Rishi Sunak, Starmer changed his mind: “We’ve made an absolute commitment to not raising tax on working people,” he said, without saying whether Reeves could stop employers instead.
The Treasury is also believed to be looking at raising billions more by increasing NI on employers’ pension contributions, which one Whitehall source said would be a “double whammy for businesses”. It is also expected to raise the main capital gains tax rates by a few percentage points. Finally, the Exchequer may try to bring in additional income by increasing inheritance tax, and possibly ending the system whereby pension pots can be handed down through generations without being taxed.
Related: Labor MPs urge Reeves to spend thousands more on ailing public services
Another government source said none of this seemed very coherent just as the government prepared to host an investment summit in London on Monday for global business leaders: “The problem now is that we seem ready to doing business at the same time. trying to promote growth. Hitting businesses with NI increases will have the real effect on working people. They are the ones who will get smaller pay rises as a result. The next shakeout will be job losses.”
A former Treasury insider said this administration was struggling not only with the mess left by the Tories, but also with their own lack of planning. “My sense is that they had little plan to come into government, partly because they thought it would be better to do so when they were in power with the help of civil servants.
“In 1997 and 2010 the plans were much more advanced. There is a lot of catching up to do on this part. They need a reset and a relaunch, a complete change of equipment. The budget is clearly the time to do that. But there is no easy way. You can’t raise these sums without some great series,” said the former insider.
