Keir Starmer was out and about on Monday, desperately trying to save his Chancellor and his own premiership (for their fates are now inextricably intertwined) from the aftermath of the Budget. He denied Rachel Reeves had misled everyone in the run-up to the Budget and sought to convince his MPs that things will get better from here for the Government, saying they had now travelled through the ‘narrowest part of the tunnel’ on the cost of living.
Let’s remind ourselves of why he’s currently in trouble. For months, in the run-up to the Budget, Reeves gave press conferences – including a special emergency speech in early November mocked by Kemi Badenoch as her ‘I interrupt your Cheerios’ announcement – and had her officials brief the media to the effect that the Office for Budget Responsibility (OBR) was telling her that macroeconomic outlook downgrades meant the previous forecasts that she would meet her fiscal targets without additional tax rises no longer applied. So if she wasn’t to cut public spending – she suggested cuts to the NHS might be the only realistic option – then taxes would have to rise, despite her having made solemn promises after her 2024 Budget that no repeat of the heavy tax rises announced there would be required again this Parliament.
It’s worth recalling why she’d felt she had to make those undertakings. At the General Election, Labour proposed about £8.5 billion in tax rises, and said that claims it would raise taxes by much more than that were ‘lies’. As soon as they got into office, they started claiming there was a £22bn ‘black hole’ in the finances that meant taxes would have to be raised by more than that – a claim that the OBR subsequently said was nothing to do with it. Then, at the 2024 Budget, they raised taxes by some £30-£40bn and raised spending by about £70bn, as well as relaxing the ‘fiscal rules’ so that they could borrow more without violating their own commitments. Everyone felt that massively raising taxes so you could massively raise spending was quite a long way from what Labour had promised at the General Election – indeed was pretty much exactly what their opponents had predicted they’d do and been called ‘liars’ for saying so.
To mollify this discontent about being deceived, Reeves swore – in the political equivalent of writing one’s own name in blood – that she’d never do it again. That left her in an awkward bind in the run-up to the 2025 Budget, when it became clear she absolutely did want to raise both spending and taxes again.
This time around, Reeves couldn’t re-claim a ‘black hole’ in precisely the same way. So instead she started claiming that she was going to have to raise taxes again because Brexit and ‘austerity’ had caused more long-term damage to the economy than previously thought – damage that continued to accelerate even now. So it wasn’t her fault your taxes were going up – no siree. It was Nigel Farage’s and George Osborne’s. If she could have found a way to blame the Poor Laws, slavery and the Norman Conquest, perhaps she would have done so, but other matters started mercifully distracting people before she got around to those options.
At the same time, it appears the Chancellor was trying to engineer a classic ‘rabbit out of the hat’ moment for her Budget speech. Reeves tried to make everyone think she was going to raise income tax rates, but wanted to announce in her speech itself ‘Aha! I’m not!!’ [Cue delirious cheers and jeers from the Labour backbenches.] Alas, her plan not to raise got leaked so the whole elaborate plot collapsed.
Of course, as we now know, none of this was true. The OBR was indeed predicting slower growth, but because inflation was higher, tax receipts were coming in ahead of expectations and so the Chancellor’s fiscal rules were not broken. Rather, Reeves raised taxes a further £26bn in the 2025 Budget because she wanted to raise spending even further and to build a war chest for later in the Parliament.
Hopefully this whole episode is the nadir of the style of Budget build-ups we’ve come to expect over the past decade. Instead of older ideas of Budget purdah and the concept of strict confidentiality with market-sensitive data and thinking, for a decade or so now Budgets have been preceded by leak after leak, so that by Budget Day itself almost everything is already known. If I leaked data and thinking on market-sensitive economic analysis and advice I offer to regulators and competition authorities I’d not only lose my job but be investigated by the police. Opposition parties are trying to force a Financial Conduct Authority probe into Reeves’s conduct this time. But in truth, Budgets have been this way for years now. It’s outrageous, really, creating huge market unfairness – if you happen to be following the journalist who got the latest leak, then you get a head-start on other financial traders – not to mention the risk of corruption. The whole business stinks.
In the meantime, things have got even worse for Reeves and Starmer as other Cabinet ministers have now started briefing that they felt misled and lied to as well, having been led to believe tax rises were required by the OBR report.
At the General Election, everyone probably believed Labour would put up taxes and spending. So maybe their comments then were like saying ‘Santa’s coming’ – an untruth that isn’t really a lie because no one is actually deceived. But this year’s events look very deceptive. And once you are seen as lying not only to the public and the media, but also to your fellow Cabinet ministers, the clock must really be ticking on your political careers. It can only be a matter of time now before Starmer and Reeves go.
The disturbing thing is that whoever follows them will probably be even worse.
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