Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe.

With less than two weeks to go before the U.K. budget, Chancellor of the Exchequer Rachel Reeves made a spectacular U-turn.

As recently as last week, Reeves was preparing the ground for a controversial move to to raise income tax rates by 2 pence and cut national insurance contributions by the same amount — a move that would have breached her party’s 2024 election manifesto. Then, after talks with Prime Minister Keir Starmer in the face of a backlash from cabinet ministers and Labour Party backbenchers, who warned that such a “betrayal of trust” would cost them the next general election, she retreated.

Officially, Labour Party sources said the change of strategy was due to a better-than-expected pre-budget forecast from the Office for Budget Responsibility (OBR), which put the gap between planned government spending and Reeves’s fiscal rules at £20 billion. It was a boost that stemmed from a smaller government debt forecast due to gilt market movements during the 10-day window the OBR used for its projection.

However, that’s only part of the story. Raw party politics also played a crucial part in this shift. And as the chancellor’s intended budget strategy has unraveled under an unprecedented public spotlight, it has exposed all the chaos at the top of the government.

It’s absolutely no coincidence that Reeves’ volte-face happened just as Downing Street launched a clumsy attempt to head off a leadership challenge that was aimed at ousting Starmer after next week’s budget is revealed.

A budget that breached the Labour manifesto would have made such a challenge much more likely, as many of the party’s MPs — including scores of “newbies” elected for the first time last year — fear they would lose their seats if it was ditched. And the retreat now means the prime minister will likely be able to avoid an attempted coup. That is, at least until after next May’s elections to the Scottish and Welsh parliaments and local English authorities.

Meanwhile, among the options Reeves is now likely considering instead of raising tax rates is cutting income tax thresholds — less politically damaging, as thresholds weren’t covered by the manifesto promise.

But even that isn’t so simple: If Reeves raised the £12,570 personal allowance at which the 20 percent basic rate starts, it would be regressive and hit many of the “working people” Labour has vowed to protect. Therefore, a cut in the £50,271 threshold, where the 40 percent rate kicks in, seems more likely. However, even that would hit those considered middle income. It would be less contentious to just lower the threshold for the 45 percent rate, which starts at the £125,140 mark.

But cutting any threshold would still be controversial, and likely branded as a “stealth tax” by both Reform UK and the Conservatives.

Plus, Reeves is actually expected to prolong the freeze on income tax thresholds and allowances introduced by former Chancellor Rishi Sunak, which is due to end in 2028, as a two-year extension would raise between £8 billion and £10 billion.

Another potential downside to the U-turn is that Reeves may now make more enemies among those who stand to lose, resulting in a less certain revenue stream from raising several other taxes in a “bits and pieces” approach rather than a “go big” budget the markets would prefer.

There is also a risk that these alternative measures would harm growth in a way that raising income taxes would not. Such measures may include a higher tax on the most expensive properties and a rise in capital gains tax. Meanwhile, plans to impose higher taxes on limited liability partnerships and to bring in an “exit tax” for wealthy individuals who leave Britain now appear to be on the back burner.

And yet, the chancellor doesn’t want to just fill the £20 billion hole, she also wants to increase the slender £9.9 billion headroom against her fiscal rules to at least £15 billion — and possibly to the £20 billion that’s sought by the markets.

Then, to top it all off, came the attempt to stifle a potential leadership challenge, as the prime minister made an attempt to deter Health Secretary Wes Streeting from mounting a coup by publicly accusing him of plotting — a move that backfired as, in the words of one insider, Starmer’s allies “overshot the runway” by singling Streeting out.

The official line is that Number 10’s briefings to the media were intended to make clear the prime minister would fight any attempt to depose him. But all this has only weakened Starmer and strengthened Streeting, who looked statesmanlike in his response.

Overall, some ministers and Labour backbenchers have expressed relief at the abrupt shift on income tax. Though many didn’t disguise their dismay at what has been described as “a shambolic week” for both Starmer and Reeves.

Indeed, with all that’s transpired, Reeves’ final package next week may prove to be less politically toxic than expected. But after such a disastrous run-up, her task of restoring order and “selling” a budget is looking much harder.