‘I honestly cannot remember a more shambolic lead-up to a budget’
Rachel Reeves' second budget as Chancellor of the Exchequer was overshadowed by its leak, in entirety, shortly before she delivered it to the House of Commons. Now shared with MPs and the public, has she done enough?
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In brief…
- The News Agents describe the lead up to the delivery of Rachel Reeves’ second budget as “shambolic” and “sulphurous”, with leaks and threats of backbench rebellion threatening to overshadow her plans for economic reform.
- Middle-income earners will be hit hardest by Reeves’ plan, they say, with Jon Sopel saying the 2025 budget presents an opportunity for the Tories to re-brand, while Lewis Goodall says it may now be time to tax the rich.
- Both believe the content of the budget, notably lifting the two-child benefit cap, will be enough to secure Reeves and Keir Starmer’s positions in government.
What’s the story?
Needless to say, Rachel Reeves' second budget didn't go quite to plan.
Her financial plans were shared online, in full, less than an hour before she delivered the 2025 budget in the House of Commons, by the Office for Budget Responsibility, which described its early publishing as a "technical error".
It meant Tory MPs had access to Reeve's outline for the next 12 months of government spending during Prime Minister's Questions, held before her official unveiling of its details.
"I honestly cannot remember a more shambolic lead-up to a budget," says Jon Sopel, describing the leak as the culmination of speculation, and a drip-feeding of vague details leading to its official delivery.
Lewis Goodall describes the build-up to the budget as “sulfurous”, with rumours of tax rises mixed with whispers of mutiny plots from Labour backbenches.
Reeves' 2025 budget includes the scrapping of the two-child benefit cap, a freeze on income tax, workers paying income tax for the first time, a new tax on homes worth more than £2 million, charges on electric vehicles, National Insurance on pension contributions which exceed £2,000 – among others
Why Rachel Reeves’ budget may be bad news for middle-income workers
Clunky delivery aside, details of the budget paint a complicated situation to middle-income workers, and those who will begin paying income tax for the first time.
“The overall big picture is that the government's tax take will reach an all-time high of 38% of GDP in 2030/31,” says Lewis.
“Growth is of course the thing this government wanted to focus on as a means of getting out of this 'economic doom loop' that we find ourselves in to try and grow the size of the economy.
“In the Labour manifesto, they talked about needing £8 billion worth of tax increases, and currently on Reeves' two budgets, we've had £66 billion.”
He says the tax burden will be placed most heavily on middle-income workers.
Jon Sopel says Reeves had the unenviable task of trying to please three entirely different "markets" with this budget – the voters, the markets, and Labour's huge, and influential, number of backbenchers.
Lewis says the lifting of the two-child benefit cap is already being celebrated by Labour MPs, who believe this action alone has lifted thousands of children across the UK out of poverty.
But Jon argues the two-child benefit cap was a bigger deal for MPs than it was for voters.
He believes further scrutiny of the 'mansion tax' will generate anger and discomfort, believing it is possible someone living on a housing estate could end up paying the same as someone living in a £10 million home in London’s wealthiest boroughs – if their property is worth more than £2 million.
Is it time to tax the rich?
Instead of focusing on middle-earners, Lewis says it’s time for Labour to make bigger, bolder and riskier decisions.
“I think there is a very strong case to move to greater wealth taxation, to reduce income taxation,” he says.
“I think there is a strong case for reform of property taxation in this country.
“We are moving to a situation where the government is going to be taking more and more money from people in the middle. That is pretty damaging for those people over the long term.”
A short-term win for Rachel Reeves and Keir Starmer?
Lewis says Reeves’ second budget will shore up support for Reeves and Keir Starmer inside the Labour government.
“The two-child benefit cap has come to occupy such a central place in the political interest of so many Labour MPs, but nonetheless I think it may weaken their external political position in the country,” he says.
Long term, Lewis adds, could result in Labour being framed as "the welfare party", with enormous rises to welfare spending forecast in coming years, and will give easy ammunition to political opponents in the future.
“I do think this creates an opportunity for the Conservative Party,” says Jon.
“You could see the reinvention of the Tories as a Thatcherite party and saying it has got to stop the ballooning size of the state, and demand a fundamental reform.
What Labour says: ‘Those with broader shoulders’ will contribute more’
Torsten Bell, Parliamentary Secretary for the Treasury and Parliamentary Under-Secretary of State for Pensions, tells The News Agents he does not accept that any of the budget delivery has been "dispiriting" for the country.
The MP says new Labour schemes outlined in Reeves' budget – such as a "job guarantee", where young people will be offered work, but have benefits taken away if they refuse it, will reform the UK's welfare system.
The government's spending on welfare will be £16 billion higher by 2029/30 than was forecast in March, with Bell blaming the previous Tory government for writing off too many people as unable to work.
Today's budget means that more people will be paying tax through their payslips, with 780,000 more people becoming basic rate taxpayers, who previously did not pay any income tax. Bell insists those contributions will be kept "as low as possible" and that those with "broader shoulders" will give more.