In the budget last year, Reeves chose only to leave herself £9bn of what’s called “headroom” – in other words a bit of cash to cushion the government if times are tougher than hoped, which is, indeed, what has come to pass.
One former Treasury minister, Lord Bridges, told the Lords: “This is not a fiscal buffer; it is a fiscal wafer, so thin and fragile that it will snap at the slightest tap.”
Well, it has been snapped by the official number-crunchers, the Office for Budget Responsibility, calculating that the economy is working less well than previously thought, which leaves the chancellor short of cash.
You can read more about what means here.
The size of the debts the country is already carrying means the markets don’t want her to borrow any more.
But most importantly perhaps, limits on what is possible for Reeves on cuts, spending or borrowing stem from the biggest political fact right now: this government is not popular with its own backbenchers, and it doesn’t always feel like the leadership’s in charge.
Downing Street has already shown it is willing to ditch plans that could save lots of money if the rank and file kick off vigorously enough.
Prime Minister Sir Keir Starmer and Reeves were forced to ditch cuts to the winter fuel allowance in 2024, and to welfare earlier this year. And there is also an expectation that extra cash is on the way.
One senior MP told me: “They need to increase the headroom, do something big on energy costs, and they have to do something for the soft left on [the] two-child cap – they have walked people up the hill.”
It will be expensive, but Labour MPs have been led to expect at least some of the limits on benefits for big families to be reversed, and help with energy bills.
For some members of the government it is deeply, deeply frustrating. One told me Labour backbenchers “want everything for nothing – we should be the adults driving the car, not the kids in the back”.
On Friday, as Reeves received the final numbers for her big budget moment, multiple sources pointed to other decisions the government has made that make her job harder – areas where Labour has appeared to contradict or confuse – and even undermine – its own ambitions.
On some occasions, the chancellor, backed by the prime minister, will say that getting the economy growing, helping business, is their absolute number one priority.
But their early choice to make it more expensive for companies to hire extra staff, by hiking National Insurance, was seen by many firms to point in the entirely opposite direction, and many report that pricier staff costs make growing their business much harder.
