The real story behind Starmer, Reeves and a very painful Budget...

Although they wouldn’t admit it, the model for the PM and his chancellor is less Tony Blair and Gordon Brown – and more David Cameron and George Osborne, writes Andrew Grice

Starmer and Reeves have a good relationship without the tension between the prime minister and chancellor that can destabilise governments (Getty/PA)

Although Sir Keir Starmer appeared to lead from the front in his Downing Street rose garden speech setting out the government’s strategy, his fate is not in his own hands. It is largely in those of Rachel Reeves who, Starmer warned, will deliver a “painful” Budget on 30 October – likely to include tax rises and spending cuts.

Indeed, some Starmer allies worry privately he has given his chancellor too free a hand in deciding a Budget and government-wide spending review that will define Labour’s five-year term.

True, Starmer and Reeves have a good relationship, without the tension between the prime minister and chancellor that can destabilise governments. Although they wouldn’t admit it, the model – if there is one – is not Tony Blair and Gordon Brown, but David Cameron and George Osborne. The latter kept their differences behind closed doors, even when Osborne opposed Cameron’s ill-fated referendum on EU membership.

As one Labour insider told me: “The question is: can you have the creative tension of Blair and Brown without the destructive bad stuff.” (Perhaps Downing Street under Labour is a bit like Oasis). Starmer respects and trusts Reeves and doesn’t pretend he knows as much about economics as she does. But some advisers think he has conceded her too powerful a role in how his five missions for government will be implemented. After all, he is first lord of the Treasury.

These Starmer allies wonder whether Labour’s early announcements, such as on planning and housebuilding, will really deliver the government’s top priority of the UK enjoying the highest sustained growth in the G7. (Although it is on track to enjoy that status this year, it might not last). Other senior Labour figures detect a problem that goes wider than the Treasury and point the finger at Sue Gray, Starmer’s all-powerful chief of staff.

“Sue has shrunk the policy team, so Keir has little independent policy advice,” one told me. “No 10 is being downskilled.” The hiring of some senior policy figures, planned before the election, has not materialised.

In yesterday’s speech, Starmer spoke of the need to remove a “deep rot, deep in the heart of a structure” rather than cover it up, tinker or rely on quick fixes. But does he have a powerful enough machine at his own disposal capable of doing that?

Reeves will not want to back down in the first test of the ‘tough decisions’ she has trailed. But she might be pushed into a tweak, rather than a U-turn, by anxious Labour backbenchers

Starmer’s instincts are to the left of Reeves, who is seen by some colleagues as an unusual combination of the old Labour right and the soft left associated with Ed Miliband, who she backed for the party leadership in 2010. Some insiders wonder whether there will be a role reversal from the Blair-Brown era, with the PM to the left of the chancellor.

I’m told Starmer is keener to prioritise tackling child poverty than Reeves, who hasn’t budged on the two-child benefit cap Labour MPs are desperate to see abolished. To placate them, some long-term goals on child poverty might be set out at next month’s party conference. The two-child cap was a Tory choice, introduced by Osborne. But Reeves’s controversial decision to end winter fuel allowances for 10 million pensioners is a Labour one, even if the party is doing its best to blame it on the Tories for leaving a £22bn black hole. I think Labour will get the benefit of the doubt for a while, but not forever.

Reeves will not want to back down in the first test of the “tough decisions” she has trailed. But she might be pushed into a tweak, rather than a U-turn, by anxious Labour backbenchers, who are getting grief from constituents, and even some ministers.

Pressure has grown since the announcement that energy bills will rise in October. Reeves is right to rebalance the settlement between the generations, which has been too geared towards the Tories’ pensioner core vote. But some Labour MPs worry she has picked the wrong target, as stories about pensioners facing hardship inevitably surface in the media.

This is hardly the first government to get the bad stuff out of the way quickly, blame it on its predecessor and hope to point to some improvements before the next election. It’s straight out of Osborne’s 2010 playbook and Margaret Thatcher’s in 1979 after the “winter of discontent”.

The Tories’ claim that Labour is softening us up for tax rises it planned all along doesn’t stack up. There is new evidence to support Labour’s claim of a worse-than-expected inheritance on the public finances. Ben Riley-Smith, political editor of The Daily Telegraph, and author of a new book Blue Murder on the Tories’ downfall, said Rishi Sunak opted for a July election partly because “hopes of a tax-cutting Budget giveaway in the autumn” had faded.

As he told BBC Radio 4: “There were bombs under the carpet in government waiting to go off, and the Tories went early with the election and allowed those bombs to explode on Labour’s watch.”