Reeves plants a flag in the sand. Will the rest of the Labour Party rally?
Jonathan Edwards
Considering that there has been only a year and a half since Labour won a massive majority at the general election, it’s quite incredible that in government the Labour Party finds itself at a point of high danger.
This columnist and others had speculated that the wheels could fall off the wagon this week. The chaos surrounding the Budget, as we saw last year, has not been helped with the tendency of the Chancellor and her team to heighten speculation for many weeks in advance of the Budget and perform major policy u-turns before they are even announced.
With the Prime Minister engulfed in leadership speculation, and No 10 briefing against potential challengers, the Budget had to achieve one thing above all else: keep Labour MPs and the wider party happy. The second major aim, in a difficult fiscal climate not helped by pre-election pledges, was to avoid an adverse market reaction.
The Budget viewed in those terms was therefore defensive in nature which highlights the weakness of the government. At the time of writing it appears both objectives have been achieved.
On the latter, UK borrowing costs remained steady, with no sharp increase. The Chancellor in the Budget increased her headroom against her own self-imposed targets, achieved primarily by ramping up taxation as the current Parliament progresses.
As the Office for Budget Responsibility (OBR) points out in its report, taxes as a share of GDP are forecasted to increase from 34.7% to 38.3% by the end of the forecasting period. As the OBR mentions, a historic high. Therefore, if the current Budget is not amended the Labour Party will go into the next general election increasing taxation year on year. In that regard, some would argue it’s a very brave political strategy.
The Chancellor will undoubtedly hope that growth in the economy is revised upwards in future Budgets, as opposed to downwards as they were in this one. However, this is a strategy based on hope that global economic fortunes will favour the UK.
If that does not happen the only solution I can see for the Chancellor is for Labour to fight the next general election on a pledge to realign economically with the EU and rejoin the economic frameworks. This would change OBR projections substantially before the general election to allow the Chancellor to reduce the tax burden as pre-election giveaways.
Leap of faith
This would require a substantial change of approach from the UK Government now on the European question, to pave the way for such a major announcement. However, at least these days Labour admits that the current Brexit deal hasn’t been a rip-roaring success. They need to make the leap of faith to the point where they admit that the actual problem is Brexit itself.
On the former, the Budget was well received by Labour MPs. The scrapping of the two-child benefit cap will be welcomed by anyone with a social conscience and was received with rapturous applause by Labour backbenchers. Backbenchers in any governing party need something to shout about. Lifting an estimated 450,000 from poverty is something that should put a spring in the step of any Labour MP.
The Budget has bought the Prime Minister and the Chancellor some time. It is therefore difficult to see any move against them before May’s elections, which was always likely to be the major crisis point in any case.
Goodwill
The decision in the aftermath of the Budget to water down a key manifesto pledge to give workers a Day One right to claim unfair dismissal could test this theory. The goodwill bought by the Budget could collapse by next week. All eyes on Angela Rayner who led on the legislation but now finds herself on the back benches. Does she strike or bide her time?
At the end of the day, the fate of the Labour party will be decided at the ballot box, and the next set of challenges are hurtling towards the Prime Minister. If Labour Party members do not rally behind their leader, their candidates will resemble Russian troops sent into the Ukrainian meat grinder.
Even if party unity can be maintained, it will not be enough. Labour’s electoral fortunes are tied to people’s perceptions of their living standards. If these don’t improve then the electorate will look elsewhere. With that in mind, the challenges facing the Prime Minister are only beginning.
Jonathan Edwards was the MP for Carmarthen East and Dinefwr 2010-24
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Built on sand. Indeed.
Living standards are not going to improve immediately, after years of stagnation. It will take time. The Labour party has to improve people’s lives before 2029, it’s a tough task. It can start with improving relations with the EU, getting rid of all the red tape on business. For Cymru the Labour party has delivered nothing 500m over four years is pittance. As a result, Reform are knocking at the door to the Senedd and Westminster if it gains power in either Cymru can say goodbye to it’s identity, it very existence. So it is important that Labour gets it’s… Read more »
We have many people now in this country who couldn’t care if our country, identity, language, culture, history, all disappear.
They only see our country as a little enclave that serves their own short term demands, whether they’re a Reform shark or a Loony Left spiv. Same severe self interest, just a different method to get it.
https://www.euronews.com/business/2025/08/26/tax-revenue-as-a-share-of-gdp-in-europe-which-countries-collect-the-most
EU average in 2023 was 40% so there’s “headroom”.
There’s also ‘footroom’ for the increasing thousands who also decide to use their own ‘headroom’ in deciding to enjoy a few years in Dubai. or similar.
0% tax rather than 40% tax means they have their most productive working years rewarded, only returning home when we have a government that believes working people are more important than non working people.
If that does happen they return to buy a house for cash and a small business where they can decide how hard they work – just in case we have another government that decides hard work shouldn’t be rewarded.
That applies whoever is in government and whatever they do because there’s no competing with 0%.
You don’t have to match it to compete with it.
If you realize on Friday that all your work is contributing to others then you just crack on and look forward to the weekend, but when you realize that it kicks in on Wednesday any hard working individual is going to think again when it goes to someone who’s stayed in bed all week.
If it’s about how the deductions are spent rather than keeping more of the money then why pick the Islamic State of Dubai instead of Dublin or Norway, for example?
And if all the cash is repatriated and spent in the UK economy it’s an awesome thing to do for UK Plc and more should do it. Anyone working overseas and Western Unioning the money back home is a one person export business. Exports contribute to GDP which means growth.
Whilst I respect the referendum vote, I don’t recall any mention of the single market on the ballot paper. Brexit has been a disaster which the majority recognise, so back into the SM would boost growth far beyond anything Reeves would do.
As shown this week, the EU are tough negotiators. Even joining the customs union will come with a hefty annual fee and commitment to agreeing to freedom of movement. I’m yet to see anything suggesting EU would consider us joining the SM
Fair point; but perhaps the growth boost would outweigh the fee.
Not just the growth but the reduction in civil service headcount. At one point HMRC said it needed 50,000 extra customs officers to manage all the extra border red tape.
Reeves’ budget seems to be a success despite the toughest circumstances since 2010, possibly earlier. Labour MPs content, markets happy, better than expected deficit. You can see it was a success because the Tory press haven’t really been able to kick off about a particular issue! I’m most happy about seeing the government caving into pressure from MPs, especially over 2 child cap. Policy aside (in my view a positive move), it means government is listening and parliament is working more like it should be- Pms should always carry their MPs with them and listen to them when they push… Read more »
This is Labour Light making a lurch to the left, but at least we do not have Labour Loony that is currently showing at the Fruit & Nut Party Christmas Pantomime, just switch Starmer/Reeves for Corbyn/Sultana to consider it could be much, much worse. ‘Labours electoral fortunes are tied to peoples perceptions of their living standards’ Stating the obvious above, but correct in that people are ONLY concerned with their own living standards, rather than being FAIR to everyone. The current government will be a one term only event as hard working people revolt against allowing others the choice to… Read more »
Your last link is part of the problem- one of perception. The government aren’t ‘rewarding’ the mother; they see it as a way of not ‘disadvantaging’ the child for the circumstances of their parents. Whenever you hear MPs and politicians talking about this, they very rarely talk about the parent, they’re focusing on the child. If they are a one term government, as you say they might be, this is an important contribution to the country’s future – all the data says is children not raised in poverty have much healthier and productive lives and boost economy and society in… Read more »
No. It will simply encourage those on benefits to have more children – hence increasing the number of poor children. Any positive impact on the number of poor children will be short-lived.
Nothing to do with perception when individuals knowingly chose a lifestyle of avoiding work, often publicly admit how easy this option is. It’s evolved from a few old mates down the pub quietly discussing the option of bad backs to quit work early, but now ramped up to internet influencers publicly advising how teenagers can claim the modern equivalent, knowing it’s even more difficult to disprove.
Children are massively disadvantaged by parents who chose to avoid work, they see an unhealthy lifestyle and underachieve in education because they already see the easy option of following the family line.
What’s your suggestion? I assume reintroduce 2 child cap? Then what 400k children are in poverty. Who does this benefit?
The rest of world watches in bemusement at how anyone can claim what is ‘poverty’. For some poverty is not having luxuries they have next door, while to others around the world it’s shelter, food and clean water.
What we do have is social poverty where parents demand the right not to work, which creates real life poverty for their children, who will be unprepared for a future world much tougher than what we have now.
For others poverty is not being able to afford rent, food and energy on their full-time wages.
You’ll notice Reform aren’t objecting to this. My guess is they’re inching towards a pronatalist argument where the state paying people to stay at home having as many “indigenous” children as possible is something to celebrate.
Over the weekend, Ms Reeves’s position has become utterly untenable.
The markets are happy enough. That’s all that matters.
It does also matter what the people think. And what the Labour back-benchers think. And what the newspaper editors think. None of these groups are particularly pleased.
That’s the PMs concern. Liz and Kwasi fell because the markets refused to bankroll their plans. That’s the consequence of a deficit which means borrowing every single day just to pay the bills.
That flag she planted in the sand is the Union flag.
Of no use to Wales, she’s robbing us.