by How difficult it is to describe the frenzy that gripped Whitehall on Wednesday evening, as officials and ministers began to shake off the economic pain that could be wreaking havoc on their departments in a few days’ time. out, it didn’t stop some of them from trying. . “What a mess,” was the verdict of one Labor figure. Another chose “chaos”. The third part was even more brutal: “Carnage.”
For a few scorching hours that night, angry messages of disbelief flew around Westminster as ministerial teams responded to demands met by the Treasury – that is, to find significant savings in their departments by the end of the day The hoofs led to direct appeals to Keir Starmer, which were soon revoked.
Cooler leaders argued that the flurry of concern was unnecessary. Treasury demands for major departmental cuts are just part of the standard pre-budget choreography that almost always results in a workable compromise.
But some departments still dragged out negotiations until Friday night. Insiders – already on edge after the government’s difficult start – fear that more mistakes could be made.
“Health is probably almost OK, but I’m not sure about anyone else,” said one concerned person. “Across the board, there is concern about what we are being asked to do.”
Some Labor figures were so alarmed by the reaction that they thought it might lead to resignation. As it turned out, much of the heat died down that evening, with Treasury sources insisting that the spending review talks had settled earlier than in some previous years.
However, many have already seen the crisis as the moment when some of the new Labor administration realized how difficult this early phase of government will be.
The size of the task is evident in the breadth and scale of potential tax increases that have emerged in recent days as Chancellor Rachel Reeves and her team search for the £40bn needed for the fiscal “reset” she wants. The list is huge, from inheritance tax loopholes to higher tax on pension contributions and an increase in capital gains tax on shares.
But the tax raids that could cause the most concern are those that threaten Labour’s election promise of not increasing VAT, income tax or national insurance. The biggest ticket item appears to be an increase in employers’ national insurance contributions, which have been raised by anywhere between £9bn and £18bn, depending on the exact measure Reeves favours.
While a Labor insider says this fulfills their promise not to increase national insurance for “working people”, the Conservatives’ claims of betrayal will only become more furious. There are similar dangers in continuing to cap income tax thresholds – which raises income tax, even though overall rates will remain intact.
If the dynamics of such a seismic budget weren’t difficult to manage, both Starmer and Reeves will have to be moved over from outside the country this week, on ill-timed tours.
Starmer is in Samoa attending the Commonwealth summit, while Reeves is heading to Washington for a meeting at the International Monetary Fund. Prime Minister’s questions will be in the hands of Angela Rayner, the secretary of state for housing, communities and local government as well as the deputy prime minister, and it is understood that she is one of those who are fighting hard in their corner regarding social housing and local authority funding. finance.
For some, the chaos that preceded this budget defines the government. “It’s a mess,” said one Labor veteran. “The way they sprayed things around and let things run was not good. There seems to be a lack of strategic control over the whole process. And decisions seem to have changed at the last minute.”
However, others believe that Reeves has played a canny game. Potentially out-of-the-box tax increases ensure that they are not a surprise, signaling to the markets that additional spending is being raised prudently from tax.
Reeves and her team are now turning their attention to the big political question: how can she sell a budget with so much apparent pain? The Observer that she is considering a clear message targeting the big rise in national insurance for employers, arguing that businesses must help get the NHS back on its feet.
It will take a political feat to withdraw the budget without succumbing to any of the many difficulties. The Government’s figures are not shying away from its historical significance, placing it alongside Norman Lamont’s 1993 tax hike budget after Black Wednesday, or George Osborne’s in 2010, raising VAT and paving the way for austerity.
Even if Reeves avoids many elephant traps immediately after the budget, government insiders have already spied coming down the track.
The long wait between the election and the budget fueled some of the frustrations of Labour’s first 100 days. But after Reeves’ statement, there will be more months to wait before the ministers can paint a more positive picture of their plans.
The multi-year spending review, which covers programs beyond next year, won’t come until the spring.
“So long until the spending review,” said one official. “That’s when we can go ahead and do things. We have the same problem again. We weren’t good enough at telling our story.”
How the intervening months are filled depends almost entirely on how well Reeves’ weekly Wednesday package is.
But there is one area that is already causing acute nervousness in Labour’s ranks – welfare. Reeves has always said that terrible “tough choices” have to be made.
It is expected, for example, that she will aim to make savings on health-related benefits of £1.3bn a year by the end of the parliament. That is the same figure set by the last Tory government, although Labor will reject the means by which they will achieve that target.
The impact could be serious, as could Labor MPs’ concerns.
“It would be quite appalling in terms of the plight of disabled people in hardship,” said Iain Porter, senior policy adviser at the Joseph Rowntree Foundation. “A lot of people in this group already have to go to food banks or go without basics, go without heat.”
Some in government are urging their colleagues to look beyond the current budget periods and a more optimistic spending review next spring.
For them, the fate of the party depends on raising its sights to a point in the more distant future – probably the spring of 2029.
Only then will Starmer and Reeves have to answer to the electorate. That is also the time, they claim, when the real verdict on this month’s budget frenzy will be delivered.
