In U.K. Budget, Labour’s First Big Political Moment Offers Risk and Reward

Two years ago, a British government rolled out a fiscal plan that rattled financial markets, drove up mortgage rates, torpedoed the pound and doomed the prime minister, Liz Truss, who would later resign after less than two months in office.

Nobody expects a repeat of that calamity when the new Labour government introduces its long-awaited budget on Wednesday. But the ill-fated Truss episode is a reminder of how treacherous budget announcements can be and of how high the political stakes can be for any new government.

That is especially true for Prime Minister Keir Starmer, whose government has gotten off to a turbulent start since his Labour Party won a landslide election victory in July. Mr. Starmer’s popularity has plummeted amid reports of internal strife and his acceptance of freebies from donors.

“It’s effectively like they’re relaunching the government,” said Steven Fielding, a political historian at the University of Nottingham. “This has to work as a media strategy, a political strategy, and above all, as an economic strategy.”

None of those three is easy, and it is a measure of the challenge facing Mr. Starmer that it is not even clear which is the hardest. Britain’s economic growth is sluggish, its public finances parlous, its Tory-leaning newspapers unforgiving, and its voters impatient after a cost-of-living crisis and 14 years of Conservative-led government, much of it marked by fiscal austerity.

Trying to Move On From ‘Miserabilism’

Rachel Reeves, the finance minister who will present the budget, will try to navigate those crosscurrents with a package of measures that aims to recharge Britain’s long-term growth and restore its corroded public services, while at the same time not blowing out the deficit or raising basic taxes on working people — a core campaign pledge of the Labour Party.