Deja Vu?

Rachel Reeve’s Spring budget seems reminiscent of George Osborne’s austerity - and now a Labour mutiny seems in sight

Planned labour cuts to the welfare system and a trimming of the civil service have been preempted in the past weeks, with Work & Pensions Secretary Liz Kendall unveiling a planned £5 billion saving to the benefits system by 2030 last week. These savings will come from particular avenues - and now Reeves has revealed how, in her Spring Budget on the 26th March.

There is actually, little surprising news. A rise in defense spending was expected, as were further cuts to departments like welfare, which has become substantially overburdened in the aftermath post-covid (see our article “Welfare off to the chopping block”). Does it mark a full return to the austerity period of the 2010s however? The left-wing Green party’s attack line in PMQs was to label the budget “Austerity 2.0” - and now Labour MPs are beginning to share its opinion.

Most significantly, the Office for Budget Responsibility (OBR) has downgraded growth forecasts for the UK economy from 2% to 1%, reflecting increased borrowing rates in the past months, persistent declines in productivity and now the uncertainties from Trump’s tariff war. This has placed increased pressure on Reeves to balance the books, as her £9.9 billion ‘headroom’ has already vanished since her last budget in October 2024.

Her headline policies to wrench this headroom back into her grasp was spearheaded by welfare savings, specifically £4.8 billion by 2030. This will be funded by increasingly stringent requirements for disability payments, and merging the criteria in which Personal Independence Payment is distributed with Universal Credit. Reeves has cited her mantra of “If you can work, you should work”, one that echoes the defense lines of Conservative cuts in years gone by. Prime Minister Starmer recently announced the dissolution of NHS England, the middleman authority that oversaw health administration in England. Now the civil service is being sent to the shopping block, with an approximate 10,000 job cuts derived from £2 billion savings year-on-year until 2030.

Her incessant lines on “fiscal rules” would not have been out of place in one of George Osborne’s budgets in 2010-12. Back then, a financial crisis had exploded the British banking sector, and the country was in the throes of recession budget deficits. ‘Reducing the deficit’ had become the key mission. His measures cut deep, and are still a topic for debate as having acted as a substantial factor for increased poverty rates. To make a direct comparison to Reeves however, would be off the mark - even if George Osborne himself made the comment “I’m starting to like this government” in his podcast ‘Political Currency’ after Labour increased tuition fees by 3.1% last year.

Reeve’s strategy is more centred around pragmatic necessity rather than ruthless pursuit of deficit reduction, having consciously managed to avoid any further tax cuts in her Spring statement. She has turned the Conservative party’s traditional strength of fiscal rectitude against them, continuing to cite an alleged ‘black hole’ left in the UK’s finances and accusing them of frivolous responsibility. Labour have pivoted themselves to the centrist position of pragmatic superiority, making good on their electoral promises of ‘if we cannot pay for it, we can’t do it’ and insistence that their manifesto was “fully costed and fully funded”. Kemi Badenoch, as leader of the opposition, has failed to propose a viable alternative. Her leading attack line in PMQs was on mobile phones in schools; Mel Stride’s budget response lacked the composure of Jeremy Hunt’s back in October.

No, it is Labour itself which are proving to be the stoutest opposition against themselves. Backbender MP Jon Trickett has already come out on social media protesting he will “not be voting for cuts to poorest people on welfare benefits”, and MP Brian Leishman agreeing “he was not on board with it whatsoever”. Seven Labour MPs had the whip removed last year over a vote on the two-child benefit cap. Chief Whip Alan Campbell MP will have his work cut out for him to mitigate a repeat revolt, especially with the alluring proposition from the Green Party to introduce a 2% wealth tax on assets over £1 billion. This could infect like-minded MPs from the left of Labour, who could be corralled by rebels such as Zarah Sultana, popular with young people, who had her whip in the benefit cap rebellion.

Reeve’s budget was unsurprising, and predictable to many. Additional investment into defense spending to take it up to 2.5% of GDP by 2027 was an uncontroversial and palatable choice. Nevertheless, the Deja Vu in her austerity-lite cuts may be unpalatable for many Labour backbenchers. The party has a 411-seat majority which makes for a distanced orbit between the numerous unpromoted backbenchers and Starmer’s (hopefully) loyal inner circle. Those serving more deprived constituencies or elsewise attracted by the Greens’ more traditional socialist counter-proposals may foment a riot when the Chancellor’s policies are to be implemented.

Questions will divert to internal stability. Can Reeves balance the books and the discipline of the Labour party? That is yet to see.