Earlier this year one No 10 aide told me that they missed the old Rachel Reeves. A Chancellor who denounced austerity in opposition had ended up defined by a cut (to winter fuel payments). Her doctrine of “securonomics” had been marginalised in favour of a more orthodox Treasury approach. And a concern with regional inequality had given way to a focus on London and the south-east.
Here is how Reeves ended up in the trough of unpopularity among party as well as country. The Chancellor needed to use yesterday’s Spending Review as a reset moment – and it was. “It’s not the SR that HMT [Treasury] officials would have written, which is a very good thing,” a Starmer ally told me.
The charge against Reeves was that she had become an unthinking automaton – one who selected winter fuel cuts from a routine menu of Treasury options, heedless of the political consequences. But yesterday’s statement positioned her as a Chancellor making distinctively Labour choices.
Reeves’ advance U-turn on winter fuel already marked a return to more familiar territory. Labour MPs struggled to defend a policy that removed the benefit from almost all pensioners. Now, with it restored to three-quarters, a traditional redistributive argument can be made.
Reeves’ aides always felt there was something incongruous about the opprobrium that she attracted from the left. Her first Budget, after all, raised taxes by £41.5bn and increased spending by £70bn a year, taking the UK far closer to its social-democratic neighbours. But style matters as well as substance. Reeves’ speech on growth earlier this year – in which she announced Heathrow expansion – cheered business though left plenty in her party cold.
Yesterday’s statement was replete with lines designed to show that the Chancellor has not forgotten her past. Her aim, she declared, was “to ensure that renewal is felt in people’s everyday lives, in their job and on their high streets” (a passage that recalled Reeves’ 2018 pamphlet The Everyday Economy).
As shadow chancellor, Reeves disowned New Labour’s approach to globalisation, embracing a more protective and interventionist state. That position was reaffirmed yesterday – “Put simply: where things are made, and who makes them, matters,” said Reeves, hailing the publicly-owned GB Energy and the rescue of British Steel (Nick Garland, the author of her heterodox Mais Lecture, was among those who contributed to the speech).
If there was anything Osbornite about the Spending Review, it was not in its fiscal policy – the former chancellor would never accept such a permanent increase in the size of the state (heading for 44.6 per cent of GDP) – but in its raw political intent. From the Treasury, Osborne shielded his party’s base from austerity and sought to use economic policy to construct the Tory majorities of the future. Reeves’ announcement of £15bn for transport projects outside London – across the Red Wall seats where Labour MPs must fend off Reform – mirrored this approach. Her decision to prioritise the NHS – even as some cast Britain as a health service with a country attached – was similarly emblematic of the party of Aneurin Bevan.
“People are only going to know the good news that we set out today if we campaign on it, if we deliver the leaflets, if we speak to people on the doorstep,” declared Reeves, who Labour MPs regard as a more natural politician than Starmer, at last night’s Parliamentary Labour Party meeting.
The road ahead is strewn with risks. I noted last month that Labour’s new emphasis on an improving economy was a hostage to fortune – the news that GDP shrunk by 0.3 per cent in April has confirmed as much. But by returning to her roots, Reeves has reassured her party that it has one of its own at the Treasury.
[See also: Labour is losing Wales]
Content from our partners
Related
