Reeves shatters manifesto ‘matrix’ with blockbuster Budget

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We knew it would be big. Huge. “A blockbuster,” predicted the chief executive of one of Britain’s biggest employers.

But what kind of blockbuster would Rachel Reeves produce? Maybe, judging by Labour’s early tone in government, Apocalypse Now or No Country for Old Men?

No, the chancellor had a better idea. Twenty-five years ago, the man widely assumed to be her long-lost brother, Keanu Reeves, starred in cult classic The Matrix. He uncovered a “matrix” that governs human lives, and valiantly resolved to defeat it.

On Wednesday, Rachel revealed she had been on a similar journey. Since July’s election, she too had realised that a “matrix” — known only as the Labour party manifesto — had been constraining her existence. With the help of Treasury officials, she would choose to fight the system.

“You take the red pill . . . and I show you how deep the rabbit hole goes,” Keanu was told. Rachel had clearly received a red pill of her own, and stared into an even scarier void. “The previous government hid the reality of their public spending plans,” she cried to a packed House of Commons. The Tories’s £22bn black hole meant that we’d been living in a simulation.

With that, she started to define reality. She whacked up employers’ national insurance by £25bn. She redesigned the fiscal rules. The manifesto/matrix shattered before her awesome powers.

In total, the Treasury red pill involved £40bn of tax rises, much of it destined for the NHS. Reeves would probably say there’s no such thing as a free lunch. Which is fair enough, given that she’s learnt the hard way that there’s no such a thing as a free suit.

She badged her tax rises as “very difficult decisions”, although she dodged the first one by cancelling a rise in fuel tax. Even action heroes have their limits. In The Matrix, Keanu is warned that many of the humans he was trying to save — “businessmen, teachers, lawyers, carpenters” — are not ready to embrace reality. In British politics, we can add drivers to the top of that list.

Some parts of the Budget were, like The Matrix, largely unintelligible on first viewing. Luckily, Reeves had a willing audience. Newly elected Labour MPs gave cheers when she cut the tax on a pint of beer by 1p. Drink up, Londoners: that works out as a free pint the next time you buy 700. The chancellor had promised no more gimmicks. But they’re only gimmicks when other people do them.

In true Hollywood style, Budgets now put their best bits in the trailers. The Commons’ deputy speaker Nus Ghani was furious. Even so, Reeves surprised MPs by saying that she would stop freezing income tax thresholds, after years of so-called fiscal drag. In Budget jargon, this was not really a rabbit — it was a decision not to kill a rabbit in 2028-29. These things have a habit of changing. If I were the spared rabbit, I wouldn’t be hopping too excitedly.

At some point since the election, someone banned jokes from Labour speeches. So Reeves’ address — an hour and 17 minutes — tested the House of Commons’ attention. She ended with a final philosophical exploration of free will, asking the Tories: “What choices would they make?”

Then it was time for Rishi Sunak. It was his last outing as Tory leader, so it was an emotional day for him, even before Reeves increased taxes on private jets.

As chancellor, Sunak once endorsed higher national insurance to pay for the NHS. Now he had to criticise it. But he did so in full voice, accusing Reeves of broken promises. Unlike him, Labour had “no experience of business”, Sunak told his audience of potential headhunters, sorry, fellow MPs.

The Commons digested its first Budget by a female chancellor just as it had digested its first Asian prime minister — without too much fanfare. But Reeves’ job of redefining reality could never be done in a single tax year. With taxes high, GDP growth forecasts under 2 per cent, and departments still thirsty for more money, the sequels are where the real action will be.