From Inside the Tent: Labour Senior Counsel Mike Buckley gives his take on The Chancellor’s Spring Statement

Mike Buckley, Senior Counsel 
01/04/2025

Rachel Reeves did what she had to do in her Spring Statement – restore the fiscal headroom lost because of higher interest rates and inflation have together driven up the cost of government debt.

Her Statement restored the £9.9bn margin of error against her “non-negotiable” fiscal rule which requires her to balance the current budget by 2029-30.

Opponents argue that Reeves could and should have instead changed the fiscal rules – they are of Reeves’ own making after all.

But the Government firmly believe that meeting existing rules remains key to keeping both market confidence and public opinion onside, and that changing them now, so soon after they were set, would be a sign of weakness and an inability to manage public finances.

Given the high levels of government debt there is genuine fear in the Treasury that bond markets could take fright if fiscal rules were changed or broken – causing a Liz Truss-style crisis – if Reeves tore up the framework she set herself just six months ago.

Labour remembers too how the Conservatives’ loss of economic credibility under Truss, was a key cause of their landslide electoral defeat last summer. Labour does not want to follow the same path.

But that choice comes with consequences. With borrowing out of the question Reeves had two options: raise tax or cut spending. That she chose to cut spending – in particular social security – creates a double challenge for the Labour Party.

In the short term it exposes them to criticism from their own side as well as opponents. Labour MPs, the TUC and living standards-focused think tanks like the Joseph Rowntree Foundation and Resolution Foundation have criticised the depth of welfare cuts, arguing they will cause too much pain to disabled people in particular, and will push thousands into poverty.

Reeves claims her policies, including benefit cuts, will get people into work instead of pushing them into poverty. She will need to work with colleagues in welfare, business and other departments to ensure that proves true. 

The second problem is that benefit cuts could harm the public perception of the party. Labour is, as claimed regularly by Ministers, the party of work. But it is also the party of social justice. Actions which bring that perception into question could harm its support among voters. That puts more pressure on the Government as a whole to ensure that social justice aims are realised along with growth and raised living standards.