At the final political cabinet before Rachel Reeves delivered her first budget this week, ministers were presented with internal party research on what the public was expecting.
In the months since the general election, they had been fed a regular diet of gloomy warnings about the state of the economic inheritance and, more recently, high levels of pre-budget news coverage, so it was firmly on their horizon.
But the public’s grasp of what the chancellor might announce was limited, the Labour cabinet was told. “People were prepared for the budget to be awful. They thought they’d be hit by every tax,” said one of those present.
“We hope afterwards they’ll say ‘well that wasn’t as bad as we thought it might be’. But that won’t crystallise straight away. Voters are very cynical. They need to see tangible change in their public services and to feel better off.”
What nobody could miss was the scale of the budget, with record £40bn tax rises, borrowing soaring by about £20bn and spending going up by almost £70bn a year, as Reeves sought to reverse more than a decade of decline.
“The only way to improve living standards and the only way to drive economic growth is to invest, invest, invest,” she told MPs. “There are no shortcuts, and to deliver that investment we must restore economic stability and turn the page on the last 15 years.”
Reeves’s budget finally began to answer the question about what Keir Starmer’s government stands for: more support for public services, protecting the incomes of working people and investing in the fabric of the nation, although there was little mention of Starmer’s “missions”.
In many ways, it was a traditional Labour budget – one for voters who rely on their local schools and hospitals, who earn a modest income and need their cars to get around.
Tax rises were targeted at the wealthy, including those who travel by private jet, and at businesses, through a hike in employers’ national insurance contributions (NICs), which make up more than half the extra tax haul.
The NICs change is a gamble, as the Office for Budget Responsibility (OBR) believes firms will pass on the impact through lower wages. Labour already faced the charge from political opponents of breaking a manifesto commitment not to increase taxes on working people.
But the bigger the budget, the bigger the risk. “These are my choices,” the chancellor said, meaning that if they don’t bear fruit, if the economy doesn’t grow, if public services don’t improve and if people don’t feel better off, she will be blamed.
Starmer often talks about delivering a decade of national renewal. To do that, he has to win the next election. Labour MPs will be wondering whether this budget will have done enough, after a rocky first few months, to get them on track.
When voters ask themselves whether they feel better off in three or four years, the government needs the answer to be yes. Yet living standards are expected to increase by just 0.5% a year during this parliament, downgraded in part because of the impact of higher NICS on real wages.
They will also need to feel that their public services have improved. Yet despite huge amounts of money being poured into them, particularly the NHS, this year and next, the investment then drops away.
And if, as Reeves told MPs, economic growth is key, she needs to hope that the OBR’s anaemic forecasts are wrong, that productivity improves and that by the middle of the parliament she has more fiscal headroom.
After delivering the budget, it is traditional for chancellors to take exhausted Treasury aides for a pint at the local pub. As a result of this budget, those going for a draft beer will save a penny off the cost of a pint.
But it will take more than a penny, or a pint, to calm their nerves over whether this budget will deliver. “We wanted to level with people,” said one official. “There’s a narrow path through but it’s really hard.”
