Sort of. The basic idea was simply to allow a declaration wherever a statement was allowed. The reason for that was to allow users to declare variables only when needed and where an meaningful initializer was available. Any restrictions added were to address language-technical technical problems. The reason was never primarily to do with grammar details.

This makes sense. Someone made the decision that declarations
are statements. I assume the purpose was to allow labels to be
placed in front of declarations.

I don't know (maybe Bjarne can tell us) but I doubt that was the reason. Rather, I suspect that when C++ started to allow declarations to appear anywhere in a compound-statement, modelling declarations as a kind of statement was the simplest way to get that effect. And it makes sense and simplifies the model to only have one kind of thing that can appear in a compound-statement.