Country first, party second was Keir Starmer‘s pious mantra during last year’s general election campaign.
Wednesday’s Budget exposed that claim as a sham, with Rachel Reeves and Sir Keir putting personal survival first and the poor downtrodden taxpayer very much last.
The Prime Minister told MPs it would be a ‘Labour Budget’. He was not kidding. Taxes are up, benefit handouts are up and growth is down.
Last year, Ms Reeves tried giving Labour MPs the bald truth that scrapping the two-child benefit cap was unaffordable. Seven MPs were even suspended from the party for voting to ditch the measure.
When Labour MPs rebelled on the Chancellor’s plans to trim £5billion from the welfare bill this year, the Treasury told them scrapping the cap was off the table.
But, with mutinous MPs threatening to oust the PM and Chancellor, Ms Reeves has bowed to their demands. Projected spending on benefits has jumped by £16billion a year since March.
Taxes are rising to an all time high to pay for it. Difficult decisions on spending are delayed until after the next election. In the short term, the party-pleasing ploy will allow the Chancellor to live to fight another day.
With mutinous MPs threatening to oust the PM and Chancellor, Ms Reeves has bowed to their demands
Labour MPs cheered Ms Reeves to the rafters as she announced the abolition of the two-child cap – a move that will cost the taxpayer £3.5billion and see thousands of the country’s biggest jobless families given handouts worth more than £14,000 a year.
Left-wing Labour MPs were already calling for her to ‘go further’ last night. But they have got her where they want her now.
If Labour MPs were the Chancellor’s top priority, the financial markets were in second place.
After an initial panic when the entire contents of the Budget were leaked, the markets ended the day looking relatively relaxed – unprecedented leaks meant there were no surprises and Ms Reeves moved to double the buffer against breaking her fiscal rules.
Which leaves only the voters, who were very much third priority in the Budget and who have rather less to be happy about.
One Cabinet source acknowledged that scrapping the two-child benefit cap risks triggering a public backlash against an already unpopular Government.
The source said: ‘I’m in politics to do something about poverty so I welcome it. But there is no getting away from the fact that it is an issue where we are taking on the public rather than taking on our party and there is obviously a danger in that.’
Another Cabinet minister described it as a ‘Budget for self-preservation’.
It is hard to overstate just how much personal survival has driven the Budget process for the Chancellor and PM.
Ms Reeves has opposed the idea of a mansion tax for years. Now she finds herself imposing one to appease her party’s Left-wing, even though it will actually cost the taxpayer money over the next two years, and experts warn it could stall a recovery in the housing market for years.
Until a fortnight ago Ms Reeves was set on raising income tax to make the sums add up – even taking the highly unusual step of giving a pre-Budget speech herself to float the idea.
Ms Reeves has opposed the idea of a mansion tax for years. Now she finds herself imposing one to appease her party’s Left-wing, even though it will actually cost the taxpayer money
Lucy Powell said breaking the manifesto and raising income tax would be an act of political suicide
The idea was only dropped when Labour MPs, including new deputy leader Lucy Powell, warned that breaking the party’s manifesto so blatantly could quickly become an act of political suicide. The warnings triggered a flat panic, with the Chancellor and PM forced to abandon their plans and cobble together a rag bag of smaller tax rises to plug the hole.
The problem for Ms Reeves is that her long-term survival depends on growing the economy and sorting out the dire state of the public finances, which will require curbing runaway welfare spending, not increasing it.
The prospects for this have not been made rosier. Ms Reeves talked a good game about growth and productivity.
But, in a withering assessment, the Office for Budget Responsibility (OBR) concluded that none of the 88 measures in the Budget is likely to have a ‘material effect’ on boosting growth. Overall, the OBR said, GDP is on course to be one per cent lower this Parliament than it forecast just a year ago.
Along the way, Ms Reeves raised or created a staggering 43 taxes. That means 43 sets of losers who will be hit by the Budget measures – and 43 taxes that could unravel in the coming days and weeks.
The Chancellor left last night’s meeting of the Parliamentary Labour Party with cheers ringing in her ears. But she is not out of the woods yet.
She may have appeased Labour MPs and the bond markets, who could have forced her from office in weeks.
The voters, when they finally get their say, may take a different view.
