Analysis: Rachel Reeves's £26 Billion Gamble Could Be The Final Nail In Labour's Coffin

Rachel Reeves leaves 11 Downing Street with her Treasury ministers.Rachel Reeves said her Budget had “promised and delivered” everything Labour had promised to do when it won the election last year.It would see government debt come down, NHS waiting lists cut and reduce the cost of living, she insisted.But the key takeaway for voters from her second Budget is that taxes will go up by £26 billion – on top of the £40bn hike in her first one a year ago.Around £9bn will come from her decision to maintain the freeze in income tax thresholds, something else she ruled out last year on the basis that it would hit working people.It means nearly a million workers will start paying the higher rate of income tax, an extra 780,000 will start paying it for the first time, while 4,000 will be dragged into 45p rate reserved for the highest earners.At the same time, welfare spending will continue to rise until the end of the decade, thanks in part to the chancellor’s announcement that the two-child benefit cap is to be scrapped.Expect the Tories and Reform UK to point out this fact every day between now and the next general election.As one senior Labour figure told HuffPost UK: “It is a disaster. We are on the wrong side of every statistic, argument, policy and public opinion.”Earlier this week, the prime minister’s spokesman said that the government’s number one priority remains growing the economy.But the Office for Budget Responsibility’s analysis of Reeves’s plans showed that while gross domestic product (GDP) will rise slightly more than expected this year, it will slow down in each of the next four years.Labour’s attempts to tackle the cost of living are also floundering, with the OBR forecasting that inflation will be higher than expected in the next two years.“We can say cost of living all we like, but people don’t really believe it,” said one gloomy Labour MP. “We can’t just keep saying ‘Liz Truss’ and pretending we have a philosophy.”Another backbencher described the government as “politically rudderless”, but those Labour MPs happy with the Budget comfortably outnumbered the malcontents.That was shown by the large number waving their Commons order papers as Reeves announced she was ending the two-child cap.Moves to cut energy bills by £150 by reducing green levies have also been welcomed, as have inflation-busting rises in the national minimum wage and the living wage and a new mansion tax on homes worth more than £2 million.“We’ve kept to the manifesto and kept to the fiscal rules,” an MP told HuffPost UK. “Ending the two-child benefit cap lifting isn’t a silver bullet, but is good politics within the party. Increasing the council tax levies on high value homes will go down well too.”A minister added: “I think it was very good. Lots of public investment, great on energy prices, the cost of living and child poverty, and the fiscal rules are in place, which is the most important thing.”Nevertheless, it is the wider voting public that Reeves, Keir Starmer and the rest of the party will have to convince, rather than their MPs and activists.She is the most unpopular chancellor on record for a reason, and putting people’s taxes up by another £26 billion – having said she wouldn’t a year ago – is unlikely to turn things around.Speculation that the Budget could trigger a leadership challenge to the prime minister can probably be put to bed, with the international bond markets so far giving it a cautious welcome.But the moment of maximum danger for this iteration of the Labour government remains next May, when millions of voters will go to the polls across the UK to deliver their verdict on its performance so far.The fear of many Labour people is that there was little in this Budget to suggest that it will be anything other than a bad night for their party.Related...Reeves Scraps The Two-Child Benefit Cap And Delights Campaigners: 'We Won!'What You Need To Know From Rachel Reeves' Budget – After It Was Leaked Early'What A Shambles': Financial Watchdog Accidentally Reveals Budget In Humiliation For Rachel ReevesMillions Of Workers To Be Given Pay Rise In Reeves' Make-Or-Break Budget

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