Labour MPs fear chancellor’s tough budget will bring new set of problems

When Rachel Reeves stands up in the Commons on Wednesday, her budget will end months of speculation, allowing the government to fully set out what it stands for. And that, some Labour MPs fear, might herald a whole new set of problems.

For all the expectation management about a disastrous economic inheritance and the fabled £22bn fiscal black hole, the sheer lack of money and tight constraints over tax rises mean that however well Reeves presents her choices, many of them will be painful.

Several Labour MPs have privately expressed worry about how the image of the government might emerge post-budget, given the inevitably slow pace of tackling the crisis in the NHS.

“We’re going to be compared to the Tories,” one lamented. “It’s going to be really hard to explain the so-called boost to the NHS which doesn’t really touch the sides of what’s needed, alongside the cuts they’ve already planned to winter fuel payments and the two-child benefit cap which will undoubtedly put more pressure on the NHS.”

Another added: “Our campaign was focused on change. The expectations are high. If they’re going to make the tough announcements early with things like the winter fuel payment, they need to be confident and give people some hope on Wednesday.”

There will be some positive stories to push from the budget, the first presented by a female chancellor. Health spending in particular is tipped to rise, and changes to the government’s fiscal rules on debt set out this week by Reeves will open the taps on tens of billions of pounds more in much-needed infrastructure spending.

Perhaps most politically useful of all will be the end of the 17-week gap between the election and the budget, one many Labour MPs believed was too long and allowed a policy vacuum to be filled with endless scrutiny of the few things that were known, notably the removal of the winter fuel allowance from most pensioners.

MPs have been promised they will have a good story to tell on the NHS. The boost to NHS coffers has also been pledged to deliver the two key priorities constituents are most anguished about – elective waiting lists and appointments.

A key dividing line is welfare. For some MPs, this is where any major change or cuts would be a red line, particularly for disabled people or families. “People will start to think, what is it worth, being a Labour MP, if we are doing this?” one said.

But another said that although no one would want to see significant cuts, there was a strong feeling in No 10 and among a lot of MPs that a tough approach to benefits was not unpopular. “We all know what Rachel’s instincts are on that,” one said, referring to Reeves’ time as shadow work and pensions secretary, during which she took a lot of flak from the party’s left for her rhetoric.

All this, however, must be been context. For one thing, there is no Treasury-No 10 split, with Treasury insiders expressing private pleasure at the response to cabinet ministers writing directly to Keir Starmer to raise concerns about their budgets. “No 10 gave them short shrift – and that’s been good for us,” one said. “Keir backs everything that we are doing.”

Similarly, beyond a generally known minority of malcontents, concerns from Labour MPs are unlikely to be aired in public.

“I don’t think people have fully understood just how loyal the 2024 intake is,” said one backbencher among its number. “A lot of us were selected a long time in advance, and with a handful of exceptions, we’re all signed up to the Keir project. It’s nothing like the Tories in 2019, with a load of accidental MPs and then Covid to keep them all separated. Don’t expect any big rebellions.”

Another MP predicted there would be very little dissent. “We’ve basically been banded together by some of the difficult votes on two-child limit and winter fuel allowance. We’ve weathered them and it has been very tough. I think that means we know that we can make the argument even when our constituents feel quite strongly opposed to something.”

Some real risks, however, do remain, with the Greens and Liberal Democrats expected to attack elements of the budget from the left, as well as the inevitable Conservative salvoes about any tax rises meaning Labour has broken its manifesto promise.

More crucially still, the first Labour budget since Alistair Darling’s in April 2009 is likely to be seen as a defining early moment for the still-new government.

Speaking on Friday morning, the New Labour grandee David Blunkett warned that it could set a tone that would be reflected in local and byelection results across the parliament. “If you’re going to get a second term, to do what you really want to do, on a long term basis, then you have to keep a degree of popularity,” he told the BBC.