What does Rachel Reeves have in common with George Osborne? It’s not that she is hell-bent on delivering an austerity agenda – even if parts of the left have accused the Chancellor of doing just this. Instead, there is one thing Reeves wants to replicate when it comes to her Tory predecessor: a good working relationship with the Prime Minister.
As she told me in 2022: “Politically, we disagree a lot. But I think the relationship between [David] Cameron and Osborne is something I would want to emulate with Keir.”
Reeves knows from history such a dynamic can be hard to come by. The fractious relationship between Tony Blair and Gordon Brown dominated the New Labour era. Boris Johnson and Rishi Sunak’s relationship was full of spending battles that later led to a deeper rift when Sunak quit his government when Johnson was at his lowest. Liz Truss and Kwasi Kwarteng started off as friends – and neighbours in Greenwich – but things quickly went awry after the “mini-Budget” and she abruptly sacked him.
So there is a reason that the Cameron/Osborne relationship looks the rosiest. The pair worked in lockstep and even now are on good terms – Cameron just this week appeared on his old colleague’s Political Currency podcast for a special series. It’s hard to imagine the others doing the same – even if it would make for interesting listening.
So far, the Chancellor has made good on this ambition. Other than Pat McFadden (also a close ally of Reeves), she is seen as having the closest relationship with the Prime Minister. Their two teams often work hand in hand – from opposition days into government. Ahead of the Budget, efforts by Cabinet members to go around the Chancellor – by sending letters directly to Starmer – were rebuffed. He made clear he backed Reeves’s judgement. The usual “No 10 vs No 11” stories have been absent.
But as the new year gets under way, can this last? With concern rising over the economic outlook for the next 12 months, their relationship is about to be tested. The problem? Of all the ministers sitting around the Cabinet table, it’s Reeves who faces the grimmest outlook going into the new year. Despite spending much of the election and first few months in government talking about economic growth, the Labour Party is struggling to come by any.
What’s more, a series of decisions on spending – from cutting winter fuel payments to bringing in the farmer inheritance tax – have led to a voter backlash.
A new YouGov poll shows that Labour’s lead on the economy has evaporated. Of those surveyed, a mere 21 per cent said they trust Labour most on the economy – with 24 per cent opting for the Tories. Labour’s lead over the Conservatives on the issue earlier this year was seen as hard won and a key factor in the party’s election victory. It was this achievement that led to Reeves being feted by colleagues.
But that is beginning to change. Labour aides have blamed much of their bad start on Sue Gray, Keir Starmer’s now departed chief of staff, whom they accuse of inadequate planning for government. However, as the new year begins, it is the economy that is most worrying Labour MPs – and there all roads lead back to No 11.
While Labour politicians will go on about the Tory inheritance, it’s clear that certain decisions by the Government have not helped matters. Negative talk on the state of the economy has hurt both business and consumer confidence.
While Starmer has been loyal to Reeves, the same cannot be said of all his colleagues. Ministers privately question the wisdom of axing the winter fuel payment so early on. “It has defined us,” says one unhappy party figure. In No 10, there are whisperings of concern over some of the moves. Downing Street sources have had to deny it has plans to set up a joint No 10/No 11 economic unit aimed at exerting more influence on economic decisions.
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Read MoreA common complaint in the parliamentary party is that too many decisions have been made by the Treasury – with not enough attention paid to other departments. The spending review is under way and will see ministers go to battle for limited funds. Already some in the party whisper that the Chief Secretary to the Treasury Darren Jones could be made a scapegoat for difficult decisions.
But the biggest problem is growth. Over Christmas, the Confederation of British Industry warned that the economy is “headed for the worst of all worlds”. The Opposition is warning of a recession made in Downing Street. It’s a far cry from the pre-election predictions of a “stability premium” that would see investors flood to the UK as a safe haven in a chaotic world.
Reeves will hope that her planning reforms and change to borrowing rules for capital spending will lead to growth in the medium term. Without it, Starmer and Reeves will find themselves in serious trouble. Reeves has said that she will not go back cap in hand asking for more taxes like she did in the Budget.
When she made this claim, Cabinet colleagues raised an eyebrow. Can she really avoid more tax rises and borrowing? If she can’t, then the trust that has so far seen Starmer leave Reeves to make the big calls will slowly ebb away.
Katy Balls is political editor at ‘The Spectator’ magazine
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