When Britain's chief business minister, Rachel Reeves, presented the government's budget on Wednesday, it was a pivotal moment for her. No less on the hook was the man behind her, Prime Minister Keir Starmer, whose future may also depend on how voters and financial markets view her plan.
The initial reaction to Ms Reeves, the Chancellor of the Exchequer, suggested she was throwing Mr Starmer a political lifeline, at least temporarily. The tax and spending increases she announced were well received by Labor MPs, who had grown restless with a government weakened in its first 16 months by policy reversals, a faltering economy and declining popularity.
The markets also seemed satisfied. The pound rose against the dollar while the government's borrowing costs fell, sparing Mr Starmer the backlash that bankrupted one of his Conservative predecessors, Liz Truss, when she delivered a 2022 budget with sweeping tax cuts.
But whether the budget will help Mr Starmer win back favor with a disaffected public is another question entirely. Nothing in Ms Reeves' presentation raised hopes that Britain would shake off the sluggish growth that has hampered it for more than a decade. Facing unrelenting budget constraints, she announced tax increases on both the wealthy and middle-income people.
“It was a weak budget from a weak chancellor trying to consolidate a weak position and perhaps buy herself some time,” said Robert Ford, professor of politics at the University of Manchester. “But in the medium term it will reinforce their weakness. The biggest problem Starmer and Reeves have now is their credibility.”
Steven Fielding, a Labor Party expert and emeritus professor of political history at the University of Nottingham, said: “It seems to have appeased the right people without changing how people view this Labor government. It may not help them too much with voters.”
The Labor Party trails the right-wing anti-immigration Reform UK party 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 is not due to call a general election until 2029, his waning popularity has raised concerns that he could be challenged for leader by someone from his party, perhaps as early as next May, after Labor is expected to suffer defeat in local elections.
Mr Fielding said the budget's respectable reception by Labor lawmakers and markets would likely silence those talks for now. “Given all the dire predictions about the budget,” he said, “is no disaster a triumph?”
Still, the administration's day got off to a bad start when the Office of Budget Responsibility, a financial watchdog group, mistakenly released the entire budget before Ms. Reeves had even spoken. Treasury yields plunged as traders reacted positively to some numbers, only to rise again. (They fell later in the day as analysts digested the budget better.)
The flawed budget release prompted opposition Conservative Party leader Kemi Badenoch to declare: “This has been the most chaotic lead-up to a budget in living memory.” After Ms Reeves finished her speech, Ms Badenoch described the budget as a “complete humiliation” and called for Ms Reeves to resign.
Nigel Farage, the Reform leader, claimed the budget would punish working people if they had to pay for wasteful social programs. He called it an “attack on striving and an attack on saving.”
While the new taxes affect people of all income levels, the budget is aimed at wealthier people. Ms. Reeves announced an additional tax, called the “men’s tax,” that would be levied on properties worth more than 2 million pounds, or $2.6 million. She had previously optimized inheritance taxes, which brought angry farmers to London on tractors to protest.
Among Ms. Reeves' key policy decisions was the abolition of the cap that had allowed parents to claim child-only tax credits her first two children, not all of them. Labor lawmakers and charities had been pushing the government for months to scrap the cap, which was introduced in 2017 by a previous Conservative government.
Abolition, the government says, 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 prove that the additional child was the result of rape.
“I will no longer tolerate the grotesque humiliation of the rape clause against women,” Ms. Reeves said in the most impassioned part of her speech, which focused on statistics and economic jargon. “It's dehumanizing. It's cruel.”
After Ms Reeves sat down, a smiling Mr Starmer put his arm on her shoulder. The relationship between Prime Ministers and Chancellors is one of the most important and often difficult relationships in British government.
When united, as Tony Blair and Chancellor Gordon Brown did during most of Blair's decade in Downing Street, it can be a powerful alliance for setting economic policy. When they are divided, as Margaret Thatcher and Chancellor Nigel Lawson were at the end of their terms as prime minister, it can be deeply destabilizing.
Mr Starmer has stuck by Ms Reeves even after she compounded the government's political problems with tax rises in her first budget last year and sparked a crisis by axing a subsidy for heating oil costs for older people. The government later reversed the plan.
“I think this is the ideal prime minister for this chancellor,” Professor Fielding said with a wink. “Starmer has left economic policy to Reeves to a very unusual degree,” he added. “Historically speaking, it’s a pretty strange situation.”
As Ms. Reeves has delved into economic policy, Mr. Starmer has increasingly taken on the role of globe-trotting statesman. He is at the forefront of efforts to form a European “coalition of the willing” to defend Ukraine and traveled to Washington to try to dissuade President Trump from imposing tariffs on Britain.
Mr Starmer's travels could be a respite from his domestic worries. But foreign policy successes are unlikely to help him in the next election, experts noted. If anything, they could serve as a reminder of the danger that external shocks such as Mr Trump's trade policies pose to the British economy.
“It will probably be fine for today’s markets,” Jonathan Portes, an economics professor at Kings College London, said of the budget. “But you would be brave to bet that this will continue in the face of a significant negative shock – and we know such events happen.”