Rachel Reeves is Labour’s golden girl – much cleverer, say her fans, than Sir Keir Starmer. The shadow chancellor has certainly done a spectacular job in moving the Labour party from one which is never trusted on the economy to one which an overwhelming number of voters might – if the polls are right – trust way more than the current incumbents.
Ever since Reeves stood in for a Covid-stricken Starmer to respond to the October 2021 Budget, she’s been feted and admired for her pragmatism. Facing the then chancellor, one Rishi Sunak, Reeves had little time to prepare her riposte. Yet not being ready was probably the best thing to have happened to Reeves, forcing her to spar on her feet rather than read from the more tutored response which she would otherwise have formulated given the time.
The former Bank of England economist was quick, claiming that never in the long history of the British parliament “has a chancellor asked the British people to pay so much for so little”. It was a fair analysis of 13 years of an allegedly low-tax Conservative government.
She went on to tell the Commons: “The highest sustained tax burden in peace time. And who is going to pay for it? It is not international giants like Amazon, no, the chancellor has found a tax deduction for them.
“It is not property speculators, they already pocketed a stamp duty cut and it is clearly not the banks, even though bankers bonuses are set to reach a record high this year.
“Instead, the chancellor is loading the burden on working people. A national insurance tax rise on working people, a council tax hike on working people, and no support today for working people with VAT on their gas and electricity bills.”
Her attack went down a treat, not only with voters sick to death of paying ever higher taxes but with a broad range of business leaders who were suddenly alerted to her potential and that this was a Labour chancellor they could do business with and wouldn’t scare the horses. Or the gilts markets.
Reeves herself also seemed to go into overdrive, seizing the moment to spread the message that business had nothing to fear from a Starmer-led Labour. Her blitz to woo the money men and women may not be quite as jazzy as the prawn cocktail offensive of the pre-Blair era when the late Mo Mowlam became something of a star in Britain’s boardrooms but she’s been equally effective.
Where Mowlam was charismatic and liked a laugh, Reeves is seen as worthy, more the head girl at school type. Yet her style is working: business bosses and executives are queuing up to meet the woman who could soon become Britain’s first female chancellor at Labour’s business forum being held at the party’s conference in Liverpool next month.
Word is that more than 200 business chiefs are due to attend while another 150 delegates are waiting patiently on the waiting list. Even the Spectator – whose annual party at the Conservative conference is the one to be seen at – has smelt the shift in power and is said to be hosting a rival party for the first time at the Labour conference.
One businessman who has watched Reeves work the crowd at several City get togethers, and knows her well, says: “Rachel is pleasant. She listens. You really can’t say that about any of the Tory politicians we talk to. They are rude. She doesn’t come across as having too many prejudices. She wants to learn.”
It helps that Reeves – together with Starmer – has promised neither to raise income tax nor to introduce a more controversial wealth tax, despite extensive lobbying from the left of the party. She has also gone out of her way to promise that a Labour government will stick to current fiscal policy and spending limits. Indeed, Reeves has gone further, also pledging not to bring in a mansion tax on expensive properties or to increase capital gains tax – both moves which the harder left of the party are arguing for.
To date, Reeves only tax commitments are to scrap non-dom tax status, close down the tax loophole used by private equity managers to get away with what’s called “carried interest” and to add VAT to private school fees as well as cracking down more generally on tax avoidance.
It’s hard to argue against any of these measures – even the most hard-core City figures would agree that the private equity loophole is deeply unfair.
Yet the money raised from introducing these taxes wouldn’t amount to a row of beans, and certainly not enough to fund any new spending plans.
How then does Labour raise money to fulfil the other promises that have been made, about improving public services such as mental health or childcare? It’s got to come from somewhere – even the Tories have climbed the money tree and found it bare of fruit.
Paradoxically, it’s Reeves who now talks most about growth, and that prosperity can only be achieved through growth – and not taxation. In a recent interview, she said again: “We don’t have any plans to increase taxes outside of what we’ve said. I don’t see the way to prosperity as being through taxation. I want to grow the economy.”
She went on: “It is going to be through growing our way there. And that’s why the policies that we’ve set out are all about how we can encourage businesses to invest in Britain.”
Reeves is right, of course, as was Liz Truss. Growth, through improving productivity and attracting more investment either internally or externally, is the only way for any country to grow.
Do we believe Reeves, and the joint pledges about no big income tax rises or more complicated penal wealth taxes? Possibly, but it’s early days.
Yet there are other positive signs that Reeves is not just mouthing pleasant rhetoric to keep voters and the money men on side. Although she worked as an economist at the BofE and then HBOS before becoming MP for Leeds West, close friends say her political philosophy comes more from her extremely close relations with big private sector unions like Unite and Transport and General Worker’s Union. Her relationships with the unions have helped form her beliefs, helping her realise that without successful business, companies don’t make a profit and employees don’t increase their standard of living.
John McTernan, former political adviser to Tony Blair, who describes Reeves as one of the most consequential Labour politicians since the 1960s, says that the shadow chancellor believes totally in pro-competitive markets, that she gets that governments don’t get to pick winners and that losers can’t pick governments.
McTernan adds that neither Reeves nor Labour need to make any big or bold economic pledges now as we are at least three Budgets away before the next general election. “Why should Reeves make any promises? Strategically, it would be daft to commit now. She just has to wait and see what the government does in the next three fiscal events. For example, it was Jeremy Hunt which announced more money for childcare which Labour can now follow, and if it wants, increase.
“Ironically, it’s the government which is out campaigning now rather than the opposition. Labour does not have to say anything.”
While Reeves may be the golden girl to many, there have been a couple of blips which has prompted some to question her judgement such as her staunch defence of Dame Alison Rose, NatWest’s erstwhile chief executive, during the Coutts scandal over Nigel Farage’s bank account farrago.
It seems a long time ago now but Rose resigned as the NatWest boss after admitting that she had told a BBC journalist that Coutts was the banker to Farage which had suspended his bank account. Rose broke the cardinal rule at the heart of banking which is client confidentiality.
Yet in an interview with Channel 4 News, Reeves said that Rose had been a victim of “bullying”, and implied that Treasury ministers were partly responsible for her departure. Rather than attacking the banks on behalf of Farage, she said the chancellor, Jeremy Hunt, and his colleagues should be tackling the cost of living crisis.
The next day Rose resigned – apologising for her serious error of judgement – prompting both Channel 4 News and Reeves’s office to report that the interview had been recorded the day before Rose resigned. Yet Reeves made no attempt to correct or add to her comments although later that day, Sir Keir Starmer did say Rose was right to go.
Reeves’ comments stunned many in the City, prompting some to ask how she could claim that Rose was being “bullied” when the chief executive by her own admission had apologised for breaking that most basic of banking ethics by revealing information about one of the bank’s own clients. They believe Reeves got the affair badly wrong, that she fell for the obvious trap of seeking to blame others for Rose’s mistakes because the former NatWest chief was a woman, yet another example of classic left-wing ideology suggesting that Rose was a victim rather than the protagonist – for whatever reason – of a hugely complex problem.
Her response was an easy, some would say, lazy card to play: the female/diversity card rather than a serious analysis of what had gone so wrong with Coutts’ internal policies on client confidentiality. More worrying to some is that her response was a sign of far more damaging cultural and economic shifts to come if Labour were to take power.
Indeed Tim Montgomerie, conservative thinker who launched Unherd and Conservative Home, fears that Reeves’ judgement on the Rose affair is indicative of a far more dangerous trend: the socialisation of private companies. In the latest Reaction podcast, Montgomerie warns that big business has already succumbed to the heavy hand of endless compliance on issues from diversity to human resources to the environment. But his greatest fear now is that a Labour government would extend this heavy regulatory hand to the extent that even private companies become quasi-arms of the state.
He makes a fascinating point, one which business should wake up to before it is too late. While such an emphasis on looking after employees is in many ways a force for good, if such compliance and regulatory oversight becomes too overbearing, companies will become risk averse and cautious. Entrepreneurialism and risk-taking will be quashed. Put another way, go too woke, go broke. Let’s hope that Reeves, a champion chess player in her teens, has not played a zugswang.
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