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13 January 2025

How much danger is Rachel Reeves in?

The Chancellor can’t afford more bad news.

By George Eaton

On the day Keir Starmer became Prime Minister there was one appointment above all that was not in doubt – that of Rachel Reeves as Chancellor (“I hope you know,” he quipped as he told her the news). In opposition Reeves had made herself indispensable to Starmer by reviving Labour’s fiscal credibility and improving relations with business. Starmer, who does not have an economics background and came late in his career to Westminster in 2015, leaned heavily on Reeves for advice (in 2023, we deemed her the most powerful person in Labour). Here was a truly joint partnership.

But for Reeves, sorrows have come not as single spies but as battalions. Economic growth – on which she staked her reputation – is flatlining and UK bond yields are rising. Business and consumer confidence have plummeted. Unpopular policies such as the winter fuel payment cuts have damaged Reeves’ standing inside the cabinet. A member of her team – Tulip Siddiq, the City minister – is under increasing pressure to resign over her links to the deposed Bangladeshi regime. And, for the first time since Reeves entered the Treasury, her own position is being questioned. “There is one common author of Labour’s major missteps,” an insider told me, “the needless locking in on tax, winter fuel, the farmers.”

How much trouble is Reeves in? She can ill afford more bad economic news – in a very real sense. The narrow headroom of £9.9bn that she maintained at the Budget is being eroded by low growth and higher government borrowing costs. Reeves can pencil in future spending cuts but these will further antagonise cabinet colleagues and depress GDP forecasts. The risk is of a political and economic doom loop.

Treasury aides concede that they are “not happy” about the performance of the economy – growth fell by 0.1 per cent in both September and October – but argue that this is an inevitably painful transitional period. “Growth forecasts would have been far worse had we carried on with the previous government’s plans,” one said, pointing to “a national debate distracted by how public services are about to crash rather than how you’re going to grow the economy”.

Growth will be the theme of a speech planned by Reeves at the end of this month – one designed to avoid her being cast as merely a tax-and-spend Chancellor. The address, which Treasury officials emphasise has been in the works since November – and say will not be a “silver bullet” – will focus on supply-side reform, regulatory reform and trade as key opportunities for the UK.

Reeves’ aides are phlegmatic about the increasing speculation over her future (“it comes with the course,” one said). But the Chancellor now faces perhaps the greatest test of her political career.

Among Labour MPs, Pat McFadden, the Chancellor of the Duchy of Lancaster (often seen as the “de facto deputy prime minister”), is regarded as the most plausible candidate to replace Reeves. He served as shadow chief secretary to the Treasury from 2021-23 and is a close ally of Morgan McSweeney, Starmer’s chief of staff (as, it’s worth noting, is Reeves). McFadden’s sober demeanour, one minister told me, would make him a natural choice to regain the full confidence of the markets.

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Few inside Labour doubt that Starmer is ruthless enough to remove Reeves if ultimately required (he today refused to guarantee that she would remain Chancellor until the next election). He ousted Sue Gray as his chief of staff after just three months in No 10 and in 2021 demoted early allies such as Anneliese Dodds and Nick Thomas-Symonds from the shadow front bench. But sacking Reeves would be of a different magnitude – there is no politician with whom his fortunes have been more intertwined. Without the Chancellor, some warn, Starmer would be left without a project at all.

Saved by the Bell?

I can exclusively reveal that Olaf Henricson-Bell – the twin brother of Labour MP Torsten – has been appointed as the new director of the No 10 Policy Unit. Henricson-Bell, who has already started his new civil service role, was previously EU director at the Foreign Office and head of communications to the Chancellor. He replaces Ninjeri Pandit who became the PM’s principal private secretary last autumn and will work alongside Stuart Ingham, Starmer’s head of policy and longest-serving aide.

“Having an identical twin brother is a defining feature of life,” Torsten Bell told me when I interviewed him in 2023 (while he was still head of the Resolution Foundation). “Apart from one brief overlapping phase [when Olaf worked in the Treasury], we work on very different things. My brother is a diplomat and I’m definitely not – in any sense of the word. My wife is also a civil servant, so having Chinese walls within families is perfectly normal, we just do that.”

For several years, Westminster watchers have speculated that Torsten will one day become chancellor and Olaf will one day become cabinet secretary. Recent events – Torsten’s arrival in parliament and Olaf’s arrival in No 10 – suggest all is going to plan.

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here

[See also: Donald Trump’s empire of ego]


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