When Britain’s top economic official, Rachel Reeves, presented the government’s budget on Wednesday, it was a make-or-break moment for her. No less on the hook was the man seated behind her, Prime Minister Keir Starmer, whose future may also depend on how voters and the financial markets judge her plan.
The early response to Ms. Reeves, the chancellor of the Exchequer, suggested that she threw Mr. Starmer at least a temporary political lifeline. The tax and spending increases she announced went down well with Labour members of Parliament, who had become restive with a government hobbled in its first 16 months by policy reversals, a languishing economy and plummeting popularity.
The markets also seemed satisfied. The pound rose against the dollar while the government’s borrowing costs declined, sparing Mr. Starmer the backlash that sank one of his Conservative predecessors, Liz Truss, when she rolled out a budget with sweeping tax cuts in 2022.
But whether the budget will help Mr. Starmer win back the favor of a disenchanted public is a very different question. Nothing in Ms. Reeves’ presentation stirred hope that Britain would shake off the sluggish growth that has hampered it for more than a decade. Faced with unforgiving fiscal constraints, she announced tax increases on both wealthy and middle-income people.
“It was a weak budget by a weak chancellor, trying to shore up a weak position and maybe buying herself some time,” said Robert Ford, a professor of politics at the University of Manchester. “But it will compound their weakness in the medium term. The biggest problem Starmer and Reeves have now is credibility.”
Steven Fielding, an expert on the Labour Party and emeritus professor of political history at the University of Nottingham, said, “She seems to have placated all the right people without changing the narrative of how people will see this Labour government. It may not help them too much with the voters.”
The Labour Party trails the right-wing anti-immigration party, Reform U.K., by double digits in most opinion polls, and Mr. Starmer’s approval ratings are among the lowest ever recorded for a British prime minister.
While Mr. Starmer does not have to call a general election until 2029, his vanishing popularity has generated scuttlebutt that he could be challenged as leader from someone within his party, perhaps as early as next May, after Labour is expected to suffer a drubbing in local elections.
Mr. Fielding said the respectable reception of the budget by Labour lawmakers and the markets would likely quiet that talk for now. “Given all the dire predictions running up to the budget,” he said, “is no disaster a triumph?”
Still, the government’s day got off to a dire start when the Office of Budget Responsibility, a fiscal watchdog group, mistakenly released the entire budget before Ms. Reeves had even risen to speak. Yields on governments bonds plunged, as traders reacted favorably to some of the numbers, only to leap up again. (They drifted down later in the day as analysts more fully digested the budget.)
The errant publication of the budget prompted the leader of the opposition Conservative Party, Kemi Badenoch, to declare that “this has been the most chaotic lead-up to a budget in living memory.” After Ms. Reeves finished speaking, Ms. Badenoch labeled the budget a “total humiliation” and demanded Ms. Reeves’ resignation.
Nigel Farage, the leader of Reform, claimed that the budget would penalize working people to pay for wasteful welfare programs. He called it an “assault on aspiration and an assault on saving.”
While the new taxes will affect people across multiple income levels, the budget does target wealthier people. Ms. Reeves announced a surtax, known as a “mansion tax,” that would be levied on property worth more than 2 million pounds, or $2.6 million. She had earlier tweaked inheritance taxes, which brought angry farmers on tractors into London to protest.
Among Ms. Reeves’ most political decisions was eliminating the cap that had allowed parents to claim tax credits for only their first two children, not all of them. Labour lawmakers and charities had pushed the government for months to end the cap, which had been instituted in 2017 by a previous Conservative government.
Removing it, the government said, would lift an estimated 450,000 children out of poverty by 2030. It would also eliminate the so-called rape clause, under which a mother could claim a tax credit for more than two children if she could demonstrate that the extra child was the result of a rape.
“I will not tolerate the grotesque indignity to women of the rape clause any longer,” Ms. Reeves said in the most impassioned part of a speech heavy on statistics and economic jargon. “It is dehumanizing. It is cruel.”
After Ms. Reeves took her seat, a smiling Mr. Starmer put his arm on her shoulder. The relationship between prime ministers and chancellors is one of the most crucial, and often star-crossed, in the British government.
When they are united, as were Tony Blair and Chancellor Gordon Brown during most of Mr. Blair’s 10 years in Downing Street, it can be a potent alliance for setting economic policy. When they are divided, as were Margaret Thatcher and Chancellor Nigel Lawson in the twilight of her premiership, it can be deeply destabilizing.
Mr. Starmer has kept Ms. Reeves close, even after she deepened the government’s political woes with the tax increases in her first budget last year and ignited a crisis by canceling a subsidy of heating oil expenses for older people. The government later reversed the plan.
“I guess this is the ideal prime minister for this chancellor,” said Professor Fielding, his tongue partly in cheek. “Starmer has franchised out economic policy to a very unusual extent to Reeves,” he added. “It’s quite a weird situation historically.”
While Ms. Reeves has burrowed into economic policy, Mr. Starmer has increasingly taken on the role of globe-trotting statesman. He is spearheading efforts to marshal a European “coalition of the willing” to defend Ukraine and traveled to Washington to try to talk President Trump out of imposing tariffs on Britain.
Mr. Starmer’s travels might be a respite from his domestic woes. But foreign policy successes are unlikely to help him in the next election, experts noted. If anything, they might serve as a reminder of the danger that external shocks, like Mr. Trump’s trade policy, pose to Britain’s economy.
“This will probably be OK with the markets today,” Jonathan Portes, a professor of economics at Kings College London, said of the budget. “But you’d be brave to bet on that holding up in the face a significant adverse shock — and we know those happen.”
