Today was the first budget where you didn’t need to listen to the chancellor to find out first what is about to happen to our economy, taxes and the welfare state.
Unfiltered by political spin and pitch rolling, and unencumbered by the argument that everything is only the Tories’ fault, we could see for ourselves the real choices, the actual costs and savings, and the true implications of the decisions reached today.
Of course, the order that documents are released and speeches are made does not change the underlying analysis of Rachel Reeves’s budget, for good and bad.
Follow the latest on the budget: Millions to pay more income tax as threshold freeze extended
They are the same decisions whether they are first revealed by Reeves to MPs in the chamber, or a cloddish leak by the Office for Budget Responsibility (OBR).
So, perhaps MPs can spare us some of the pomposity.
But still, today has not begun as Reeves would have wanted it, making the job of selling the package that little bit harder.
We saw in sharp relief how the story told by the chancellor in the Commons chamber – while all factually accurate – is only a small part of the overall picture that she has spent the last 12 weeks grappling with.
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The story the chancellor wanted to tell
Take the tale the chancellor wanted to spin.
Rachel Reeves told MPs that this was a budget for living standards, the NHS, and to reduce borrowing.
Yet the OBR document reveals that living standards will now rise at a slower rate for most of the parliament and “well below” the 1% a year in the last decade.
There was also no major bung for the NHS today despite the mentions, and the sheer levels of uncertainty the OBR has attached to so many measures make it hard to make concrete predictions about borrowing.
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Furthermore, the desire to blame the Tories – because of a long-term productivity downgrade due to Brexit, energy prices and austerity – was hampered by higher wage growth and tax receipts.
They offset the OBR productivity downgrade, meaning overall that only accounted for £6bn of the black hole that needed to be filled.
Thus, the story Reeves told about the NHS, cost of living and borrowing in a difficult budget caused by the Tory inheritance was only a partial account of the massive decisions that were made today.
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Will budget ensure Reeves and Starmer’s political survival?
The real job of today was to lower borrowing to restore headroom and find money for welfare. Overall, that means a higher tax bill to the tune of £30bn by 2030.
For months, nothing else has mattered, and the government was stuck waiting for today’s decisions.
She did so with £30bn of tax rises, taking the tax burden to the highest level ever, coupled with around £5bn of theoretical spending cuts in 2029, all offset by £12bn of higher spending mostly on welfare.
The question is whether the budget – which has become existential for Rachel Reeves and Sir Keir Starmer – will do its job for the audiences that matter most to their survival.
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Why Labour MPs will be happy
For Labour MPs, the fact that Reeves spent £9bn on welfare and benefits will go down well.
She announced how she would pay to partially restore winter fuel payments and account for the summer failure to get through health-related benefit curbs, along with the removal of the two-child limit.
You will hear MPs champion the OBR numbers: these decisions increase benefits for 560,000 families by an average of £5,310 – these are the people Labour MPs think they are in politics to help, even if the measures do not poll well with the public as a whole.
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But it’s a mixed picture for voters
So, Labour MPs may be happy, but it’s not clear they will go down so well with voters overall.
There is some limited help for the cost of living, but that is a low overall proportion of this budget, and overall, the OBR has downgraded growth in real household disposable income to just a quarter of a per cent a year.
The political danger is that the tax-raising measures will hit the very working people whom Labour MPs represent.
The changes to personal taxes combined raise a massive £15bn a year by 2029-30, and those at the lower end of the spectrum are not spared the squeeze.
The OBR says the freeze to tax thresholds from 2028 means 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate taxpayers by 2029 than in March.
Each one paying more tax, but by the back door.
The changes to national insurance on salary-sacrificed pension contributions, another stealth tax, raise a whopping £4.7bn in one year – which means people have less savings for the future.
Business is unlikely to put this money back in, so today’s generation of younger workers looks set to be relatively less well off in retirement, while today’s pensioners continue with gold-plated benefits.
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What about the markets?
The markets too are likely to be happy.
Rachel Reeves has substantially reduced her borrowing needs in the year her fiscal rules demand – moving from £9.9bn of headroom, which was so small it frightened the markets, to over £22bn.
This will be a relief, and at the time of writing, as the chancellor sat down, 10-year gilts were cheaper compared to first thing this morning.
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There is uncertainty though, including a very generous set of assumptions by the OBR, which believes welfare spend will naturally decline without reform; a failure to cost the employment law changes – a U-turn on a promise in March; and no penalty for the government for massive risks in the tax changes and SEND reforms.
But, such is the margin, that is likely to be for another day.
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What about business?
Business will not be delighted – growth downgraded every year from 2026 onwards, with little spending designed explicitly to help them.
We may have escaped the tax rise doom loop, but it is far from clear Britain has escaped the low growth doom loop.
But the aim of this budget was always survival.
Keir Starmer and Rachel Reeves were – as Number 10 admitted – facing an existential crisis.
They have thrown everything – including £24bn of your money – at this and hope, off the back of this, they can survive.
