Sidelining Reeves now is a big gamble
Keir Starmer’s mini reshuffle has sidelined Rachel Reeves just as the markets need a show of faith, writes Helen Thomas
It only took one year, two fiscal events, three per cent plus inflation, four chiefs of staff, five directors of communication and long end gilt yields at a 27-year high for the Prime Minister to decide he should have a chief economic adviser. A man who is happiest hugging fellow leaders at global summits has decided to take back control of the economy, or at least no longer devolve this apparently exogenous topic to his Downing Street neighbour. It is a big gamble. Starmer is reshuffling the pack with an untested team and sidelining his Chancellor at precisely the moment the markets are questioning the credibility of the government’s plans. Get it wrong and he will be the one that ends up shuffled aside.
As such, the new names on the economic roster can be thought of as a kind of Praetorian Guard, an attempt to shield the Prime Minister from the fatal body blows wrought by financial markets on ill-equipped leaders. Starmer has poached Reeves’ second-in-command, Darren Jones, to become “chief secretary to the Prime Minister” – an entirely new ministerial role which the accompanying press release said would “directly oversee work across the UK government to support the delivery of the Prime Minister’s priorities”. Or, put another way, someone in the firing line if the PM isn’t delivering. There is more support for Keir in the shape of the new chief economic adviser, the “world-leading economist” Minouche Shafik, who will “support the Prime Minister on economic affairs”. It’s support for Keir across the board. Middle managers always like to stuff the ranks below them with potential cattle fodder scapegoats in case of effluence raining down from above.
Cracks showing between Reeves and Starmer
Except the Prime Minister is supposed to be primus inter pares. The buck always stops in Number 10. The Liz Truss episode is so-called because it didn’t stop at the door of Kwasi Kwarteng. Hence why it is important for a PM and Chancellor to have a strong and stable relationship. But Reeves wasn’t even Starmer’s first choice for Chancellor. Upon becoming leader of the opposition, Starmer picked Anneliese Dodds for Shadow Chancellor. He only replaced her with Reeves in the aftermath of poor election results a year later, including the totemic loss of Hartlepool in a by-election. He later admitted he had thought about quitting at that point. The switch to Reeves bound the fortunes of the two together.
After all, why not choose a former Bank of England economist to take on the tricky job of managing the economy? Reeves used pre-election campaign broadcasts to emphasise her credentials, arguing “I spent a career working at the Bank of England and in business before entering politics. I know what it takes to run a successful economy”. Starmer happily delegated economic policy to her. Managing the economy became personalised in Rachel. She went on to tell the Labour Party conference last year that “we were elected because, for the first time in almost two decades, people looked at us – looked at me – and decided that Labour could be trusted with their money”. In tears on the frontbench a year later, as her plans to reduce welfare spending lay in tatters at the hands of her own party, it looked as if even she no longer trusted herself.
And so whilst Keir pilfers her team and buttresses his own, new ballast has been also added to the Treasury. New MP and former chief executive of the left-wing Resolution Foundation Torsten Bell is reported to be coming in with fresh ideas for the Budget. His former colleague at the think tank, Dan Tomlinson, has been promoted to exchequer secretary to the Treasury. The Torsten Takeover will light the fire of the left of the Labour Party.
With all these fresh faces, the Budget could easily suffer from too many cooks spoiling the broth. It will certainly complicate the Budget process, which has already become bogged down in endless forecast rounds back and forth between the OBR and the Treasury as the latter tries to convince the former to beef up its forecasts for growth.
Reeves has claimed her economic ideology can be characterised as “securonomics”. There was supposed to be a stability dividend from the grown ups being back in charge. Instead, we have “stable-nomics”, where the Prime Minister is desperately rounding up any willing political hostler to close the stable door even after the fiscal horse has bolted.
Helen Thomas is CEO and founder of Blonde Money