The crucial test that Rachel Reeves’s Budget cannot afford to fail

Forget the rows about debt calculations and exactly who are ‘working people’ – the chancellor needs only to show that she has prevented Britain from sliding back into austerity for her Budget to be hailed a winner, says Andrew Grice

How do you sell what you admit will be a painful Budget? That’s the question the best brains in the Starmer government have been wrestling with ahead of Wednesday’s make-or-break package, which will set the terms of political trade for the five-year parliament.

They have an uphill struggle. Every tax rise will be portrayed as bad news by a largely hostile media. Can Rachel Reeves outgun that with the limited supply of good news – more money for the NHS and changing her "non-negotiable" fiscal rules, which she has renegotiated in talks with herself, to permit an eventual £50bn a year of extra borrowing for investment projects?

Yet I think Reeves can win round many of the voters Labour needs to reassure. I wouldn’t have written that a few weeks ago, when the government’s communications were poor. The three-month vacuum since Reeves’s July Commons statement, announcing the means-testing of the pensioners’ winter fuel allowance, was filled gleefully by the media with the freebies’ controversy. An unhappy, mutinous Downing Street crew poured fuel on the fire by doing their infighting in public.

No 10 failed to use the power at its disposal to change the music. At one point, its feeble attempt at diversion was a picture of the Starmers’ new cat. Starmer seemed naively unaware of the need for a 24/7 effort to control the agenda rather than relying on damage limitation after most of the media had done its worst.

But in the past few weeks, the operation has improved. This week, three stories on the Downing Street grid of announcements “landed well” (in the spin doctors’ lexicon) – a public consultation on the NHS and reviews of sentencing and the water industry. Significantly, Starmer acknowledged the need for the Budget to “tell a story about the future of the country”.

Insiders point to the departure of Sue Gray as chief of staff. One told me: “You can’t imagine the sheer chaos previously. She [Gray] never finished anything she started, or took ages, and generated division and unhappiness. No wonder things are better.” Cruel business, politics.

Reeves is doing a good job preparing the ground for her Budget, confirming her new fiscal rules during her visit to Washington. In 42 years at Westminster, I can’t recall a Budget trailed so heavily in advance by the government.

Who knows, perhaps some of the reported tax rises won’t happen – an old trick. The rules about Budget secrecy when I came in are from a bygone age. Remarkably, Hugh Dalton resigned as chancellor in 1947 after passing some details of his Budget to a journalist on his way to the Commons. On that basis, most recent chancellors wouldn’t have made it to Budget day.

However, Reeves is right to roll the pitch in a way she failed to do on the winter fuel payment. Her aim? To ensure people and businesses are not surprised by tax rises and, crucially, not to spook the financial markets with revised fiscal rules and higher borrowing. Surprising the markets was fatal for Liz Truss’s mini-Budget.

The communications battle hasn’t been won yet. Ministers are tying themselves in knots over how to define “working people” as they struggle to convince us the tax increases will not breach Labour’s manifesto pledge to protect this group.

On Thursday, Starmer told Sky News someone who works but gets their income from assets such as shares and property “wouldn’t come within my definition”. His spokesperson later clarified that a person who holds a small amount of savings in stocks and shares still counts as a working person; Starmer was speaking about someone who “primarily gets their income from assets”.

Although Reeves will make a virtue of not using all her new headroom, Treasury officials tell me they worry that headlines about £50bn of extra spending will create great expectations that public services will improve quickly. They won’t, because this money will fund long-term building projects. Yet Labour needs to show tangible improvements to services to illustrate the change it promised – most importantly on the NHS.

I believe the chancellor’s crucial test is to persuade voters that, saddled with unrealistic Tory spending plans, Labour has saved the country from an extreme version of austerity and unacceptable cuts to investment, so the tax rises are necessary and worth the pain. It will be a hard sell and plenty of Labour MPs, including some ministers, fear privately the Budget’s tight spending settlement will feel like austerity. Reeves’s reply is that she is getting the bad news out of the way early; there will be good news before the next election.

This Budget must be a turning point. Reeves will speak of an “economic reset” but, after a wobbly start, Starmer also needs her to deliver a political reset – unusually early in the life of a government. The stakes on Wednesday could not be higher.