Chancellor Rachel Reeves’ seismic package of £40 billion in tax rises and £70 billion in spending hikes landed on Wednesday, and the cost of government borrowing has continued to creep upwards.

While this is nothing like the dramatic spike in rates which destroyed Liz Truss after her “mini-Budget” in September 2022, Reeves has clearly frayed nerves. While global watchdogs like the International Monetary Fund have given the plans the thumbs up, the Institute of Fiscal Studies – led by influential wonk Paul Johnson for the final time at this Budget – gave a searing verdict. He warned the Chancellor is playing the same “silly games” as the Tories by pretending she can hold down public spending growth in future years.

Reeves has gambled that her decision to squeeze businesses for an extra £25 billion through employer NICs hikes, while finding another £15 billion by hammering wealth taxes and private schools will not undermine the very economic growth she is trying to create.

Labour will know that politically, they cannot risk another Budget as seismic as this: either the economy beats growth forecasts as a result of these measures and people see improvement in services while feeling better off, or the sum total Reeves raised today is all she has to spend for the remainder of the Parliament. The two fiscal levers Labour have used to raise funds - taxation and borrowing - are both politically toxic and another large intervention would be extremely difficult.

This is the dilemma Labour face: only in their first Budget could they possibly get away with such a degree of unpalatable tax and borrowing. They have bet the house that today’s measures can give them a platform to invest in infrastructure and grow the economy.

Investment from a private sector they have just taxed is the Government's next path to delivering economic growth, to delivering on their number one mission for government, and the only realistic route to growing the pot available to Reeves in future Budgets.

What is clear is Keir Starmer’s fledging government now has a clear direction after a bumpy, chaotic first 100 days in power. Whether these policies work over the next year or two will go a long way to defining the future of this still new government.

(Photo provided by the BBC)