Rachel Reeves, halfway up a mountain amid the snow and fresh air of Switzerland, is staging a fightback against criticism of her sluggish growth agenda at home.
The Chancellor is at the World Economic Forum in Davos rubbing shoulders with, among others, JP Morgan chief Jamie Dimon and Goldman Sachs CEO David Solomon as she seeks to convince investors to trust Britain. She’s vying for the investment to boost growth as her competitor politicians around the world are doing the same. It’s like a round of governmental and corporate speed-dating in minus six degrees.
But Reeves has a harder job than most after business bosses accused her of talking the economy down and slapping higher taxes on business hiring. Plus on Wednesday there was more gloomy news as debt interest costs pushed up government borrowing. The budget deficit amounted to £17.8bn in December, more than double the £7.7bn recorded a year earlier, according to the Office for National Statistics. The Chancellor is due to give a speech on growth next week, when she’s expected to discuss plans to press ahead with outstanding planning decisions and infrastructure projects, including possible expansions to airports.
When it comes to planning and big projects, “the answer can’t always be no”, Reeves told Bloomberg TV on Wednesday. “That’s been the problem in Britain for a long time. That when there was a choice between something that would grow the economy and sort of anything else, ‘anything else’ always won.”
At Davos, Reeves also acknowledged the UK is changing its regulatory landscape to reflect Donald Trump’s liberalising agenda. The Chancellor said Britain was already moving faster than the European Union on financial deregulation.
Last week the UK Government announced it was delaying by a year the implementation of Basel 3.1, the final set of international banking reforms designed in response to the 2008 global financial crisis. Compared to what you may have expected from a rules-favouring Labour Government, Reeves is being forced into following the lead of the US.
Even if she is being pushed into following the American agenda, it didn’t stop a newly energised Reeves poking fun at Trump ally Elon Musk, something no one else in the UK Government has so far done publicly. She was asked whether Britain was going down the same road as Musk in cutting costs as an adviser to the Trump administration’s new Department of Government Efficiency.
“Well, look, we want to root out waste in government spending,” Reeves told Bloomberg TV, laughing. “I think maybe the comparison might end there. I’m not going to go [and] troll presidents around the world.”
Meanwhile the Government’s decision, on the eve of the Davos meeting, to ask the head of the Competition and Markets Authority, Marcus Bokkerink, to leave his post took on a new significance. What might normally only be a matter for the business pages should be seen instead in the current context of growth. It was a significant – and highly political – decision. In Bokkerink’s stead the regulator named a former Amazon boss, Doug Gurr, as its new interim chair to support growth for the UK. What could be more Maga copycat than hiring the former boss of a company that puts streamlining above all other virtues?
It’s a sign of a change of approach, a Government insider told The i Paper. “Ultimately, regulators have to choose a direction they go in and what you’re seeing is that they’re being asked to go in a direction that moves away from simply managing risk all the time,” the source said. “And that is quite a profound and interesting change, and probably one that only a Labour government could actually do, defying expectations a bit.”
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Read MoreStarmer’s Government is “an interventionist government in some places, but also a government that is prepared to remove regulations because when you speak with businesses and others, it’s the regulation stuff that comes up time and time again,” the insider added.
“Water regulation is an example of this, where the thing for decades now has been just: keep down costs. And obviously the cost of that has been rubbish water infrastructure. There are always winners and losers with this stuff. It’s not quite a zero sum, but you have to pick a side.”
In Downing Street there is a moratorium on dubbing next week’s grid of government announcements “growth week” because “every week is growth week”. Expect senior ministers to don hi-vis jackets as if they are cosplaying as former chancellor George Osborne, and fan out to building sites across the country.
But once she returns from hobnobbing with the international business elite abroad, Reeves is poised for a row with Cabinet colleagues over some of her growth measures. Two of the biggest opponents to expanding Heathrow include Energy Secretary Ed Miliband and London Mayor Sadiq Khan, on the grounds of noise and environmental pollution. Parallel plans to liberalise environmental protections – such as removing the protections on rare bats that block major infrastructure projects – are also likely to be opposed by green groups.
The question some in Westminster are asking is whether Reeves is picking too many fights in pursuit of her growth agenda. Some detractors wonder whether her authority was weakened by the bond market fluctuations and the speculation surrounding her future. A fortnight ago, some Labour MPs in the Parliamentary Labour Party (PLP) had even started to pose the question that was unthinkable a short time beforehand: whether Reeves had a future at all.
Not a bit of it, according to people in Government close to the Prime Minister, who say Reeves retains Sir Keir Starmer’s full backing.
“I think all of this comes down bit to Treasury relationships with No 10 and Cabinet, which are still pretty strong. Rachel has proven herself time and time again. There is something about her resilience that shows she has faith in her/our economic strategy. She is in a pretty strong position again after the wobble over the markets. That has dissipated. It may be that when the markets wobble in future the PLP wobbles too, but I don’t think you’d ever see Rachel going anywhere,” a No 10 insider told The i Paper.
Once home, with the snow stamped off her boots, Reeves will reach for the hi-vis jacket. She has the Prime Minister’s backing, but she might also need a hard hat to fend off some of the brickbats heading her way.
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