When Rachel Reeves finally delivers the long-trailed Autumn Budget later this month, she will do so under extraordinary pressure. The Chancellor remains trapped between the promises that helped Labour win power and the fiscal reality it inherited: a stagnant economy, weak growth and public services creaking under strain.
To the frustration of much of the party’s traditional base, her tenure has been defined by what they see as an almost puritanical dedication to “fiscal discipline”. As forecasts worsen and the Office for Budget Responsibility revises down its growth outlook, that strategy has narrowed into a dilemma many long saw coming: raise taxes, breaking the manifesto pledge not to increase the burden on “working people”, or risk being accused of timidity in the face of a crisis the government vowed to fix.
Behind the scenes, Treasury officials are prepping the ground for difficult decisions in what some in Westminster are calling “an impossible Budget”. If reports of a rise in the basic rate of income tax are correct, Reeves would be the first Chancellor to make such a move in half a century – a political gamble that could see historically low approval ratings plunge even further. Yet without new revenue, the government faces an equally damaging charge: that 18 months into its term, the state of Britain still looks much the same as it did at the start.
The speculation surrounding the Budget has become a proxy for something larger: a test of Labour’s political and economic identity. Strategists speak of the need to “hold the centre” while reassuring voters who feel no tangible change in their daily lives. Opposition senses opportunity, and even Labour allies worry that the government’s message – prudence today for progress tomorrow – risks sounding abstract in a country still waiting for proof of renewal.
The government’s defenders argue that this is precisely the moment for perspective. Labour, they insist, has not failed to act – it has begun the long process of repairing a country that could no longer afford easy answers. Much, they claim, has already been achieved.
Torsten Bell, Minister for Pensions, and reportedly a key adviser to Reeves in preparing the upcoming Budget, describes the challenge in generational terms. “Too many people have not just thought things didn’t get better – they’ve started to believe things can’t get better,” he said at a New Statesman event in Liverpool, reflecting on Labour’s first-year performance. “That loss of hope is so damaging. The job of this government is to bring it back.”
For Bell, credibility is not an end in itself but a precondition for progress. “Social democracy has always been about looking after the public finances so that you can deliver for people,” he said. “By deliver for people, I mean decent work, good homes, functioning public services. That is the social democratic offer – and you won’t deliver it with anything even within spitting distance of Liz Truss.”
He listed achievements that, Bell believes, mark genuine change: public investment “at its highest sustained levels since the 1970s”, a reformed pensions system to unlock domestic capital for British industry, and targeted support for low-income households. “We’ve doubled the number of households getting the Warm Homes Discount – that’s another 2.7 million families with money off their energy bills each winter – and expanded free school meals to 100,000 more children,” he said. “The poorest households spend 50 per cent more of their money on essentials than the richest. The short-term job is easing that pressure; the long-term job is bringing down the cost of the basics through investment.”
That long-term view has defined Reeves’ economic strategy since entering the Treasury. For Meg Hillier, chair of the Treasury Select Committee, the criticism that Labour has been too cautious misunderstands the task. “Rachel Reeves and the team did a big job going round the City saying there would be a stable approach,” she said. “It’s for the birds that she’d rip that up a year and a half after coming into government. Businesses want certainty. They want to know what’s coming.”
Hillier sees fiscal restraint not as a retreat from ambition but as the only way to make ambition credible. “We’ve got to be positive and realistic. Things have to happen fast, but with stability. The government’s been buffeted a lot, but its eyes are on the long-term prize of growth.”
Her argument echoed Reeves’ own calculation: that credibility – with the markets, with business, with voters – is the foundation on which everything else depends. But the risk is clear. As household finances remain tight and public services under pressure, patience is running out. Polling consistently shows that voters feel no better off than they did before Labour’s election victory.
For Jeevun Sandher MP, another member of the Treasury Committee, the stakes are higher than one fiscal statement. “Living standards are no longer just an election issue – they’re a democracy issue,” he said in Liverpool. “People can’t afford the basics, and they see no way for their children to live a better life. That breeds anger, division and populism.”
Sandher argued that Labour’s cautious first phase has been essential to rebuilding confidence but that the next must be about tangible improvement. “The first lever is costs,” he said. “Those at the bottom spend around 25 per cent of their income on essentials, compared to 10 per cent in the middle. Since 2021 those essentials have gone up by about 45 per cent. So we have to reduce those costs – through investment, through childcare, through housing. The second lever is social security, and the third is wages and jobs. Forty per cent of full-time workers still earn under £35,000 – the amount needed for a two-parent family to raise two children. They’re working hard and doing the right thing, but can’t raise a family. That’s the source of hopelessness. Our job is to fix that.”
Treasury officials talk about the “sequencing” of change: stabilise, invest, deliver. But outside Westminster, that order can sound like delay. For many voters, the promise was not stability for its own sake but a government capable of making life better.
Hillier acknowledged that optimism had been slow to return: “We’ve been downtrodden for 15 years, where people have given up the hope that things can get better. The task now, she added, was to restore “hope and ambition”.
That is the measure by which a growing number of disillusioned voters are likely to judge Reeves’ Budget – not by whether it satisfies the bond markets or holds to a manifesto line, but by whether it convinces them that the government has a purpose; that the hard choices of its first 18 months will one day yield change they can see.
This article first appeared in Spotlight on Politics Live
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