Rachel Reeves, who is now fighting for her political life, was instrumental in helping Labour secure a landslide majority at the general election.
If you don’t believe that then you have probably forgotten that her predecessor as shadow chancellor was Anneliese Dodds. All the while that the wild-haired former university lecturer Dodds was in charge of Labour’s economic policy the party lagged well behind on perceived competence on this vital issue.
But when the sleek, suited and booted Reeves took over that all changed. City and business sentiment gravitated towards Starmer’s party and the Tories were unable to terrify the electorate any longer about the prospect of Labour being in charge of the money.
Six months on from the election, all that has changed. Reeves is now known disparagingly as ‘Rachel from Accounts’ after her CV was discovered to have suffered a similar degree of inflation as afflicted the Argentinian economy in 2023.
Reeves approached the challenge of steering the UK economy with this same spirit of hubris, declaring at the start of the election campaign: ‘I know how to run a successful economy.’
When she took up the post of Chancellor she even released a mini-movie hailing her own achievement at becoming the first woman to hold that great office of state.
Alas her stewardship of the British economy has already proven disastrous
Alas her stewardship of the British economy has already proven disastrous. In a bid to justify tax rises following her election campaign promise that there wouldn’t need to be any, Reeves hyped up the idea that the public finances were in an unexpectedly dire state because of a £22bn Tory ‘black hole’.
Starmer himself reinforced the doom-mongering with a speech in the Downing Street garden in late summer in which he warned that the Budget, then still two months away, was ‘going to be painful’.
Unsurprisingly, economic sentiment divebombed and growth, which was supposed to be this administration’s over-riding goal, dried up. When the Budget did come, Reeves delivered a shocking £40bn of annual tax rises. The great bulk of the projected extra revenue was earmarked for increases in NHS spending and public sector wages rather than to repair public finances. There was no £22bn ‘black hole’, as a review by the Office for Budget Responsibility made clear. The OBR did find though that the overall effect of the Reeves Budget would be to immediately drive down growth – totally undermining her supposed top priority.
Now the bond market has turned against her too, raising borrowing costs by billions of pounds and more than likely removing all her projected fiscal ‘headroom’ in advance of a spending review.
It would be possible to argue that Reeves had just got unlucky in tricky circumstances were it not for the appalling judgment she has also shown over the political implications of various measures.
Taking winter fuel allowance away from all but the poorest 15 per cent of pensioners has caused enormous reputational damage to Labour in return for a very modest financial saving. Former Tory Treasury ministers have identified the policy as being one part of a ‘hobby horse’ file that mandarins in the department attempt to inflict on every incoming ministerial team. An inheritance tax onslaught against farmers is another. ‘There’s a reason why the ideas in that file have stayed in that file until now,’ says one.
There are, however, two good reasons for thinking Starmer will be extremely reluctant to clear Reeves out of the Treasury. The first is that Labour is short of experienced talent at a senior level and it is difficult to see who could command any more credibility. Yvette Cooper is a former Chief Secretary to the Treasury and has the standard Oxford PPE degree, which makes her one possibility. There aren’t many others.
Secondly, ditching a chancellor is very different from ditching, say, a purple-haired transport secretary with a chequered history as a custodian of mobile phones. If a chancellor is dismissed, it tells people that stewardship of the economy is in crisis. And that casts doubt on the judgment of an incumbent premier too.
After all, his sacking of Norman Lamont after Black Wednesday did not lead people to forget that John Major had been the chancellor who took Britain into the ERM. And even in his pomp, Tony Blair never dared kick Gordon Brown out of the Treasury, for fear of the reputational hit.
So Rachel from Accounts will only be removed if Starmer decides he has no other viable way of saving himself. We are not there yet. But those are the rocks that ‘UK plc’ is steaming towards at a fair old rate of knots.
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