Can Rachel Reeves think outside the box?

Keir Starmer looks set to win the next general election by exercising iron discipline over his party. He will need more than that if he is to win the one after. He will need Rachel Reeves, Labour’s Shadow Chancellor of the Exchequer, at the top of her game.

The Labour leader has bet the farm on economic growth to fund his programme of national renewal. He will inherit a Britain coming apart at the seams. If Reeves can’t deliver on the economy, the Starmer project won’t leave the starting blocks. What Reeves thinks matters. How she performs will matter more.

So who is Britain’s likely first woman Chancellor and what is she offering? Oxford-educated, teenage chess champion, ex-Bank of England economist, she worked at the British Embassy in Washington DC and HBOS bank before winning Leeds West for Labour in 2010. Pretty standard fare for politicians on the up. Not a hothouse plant, but not much real-world experience, either.

She is widely regarded as thoughtful and somewhat conventional, perhaps a little dreary. Her parents were primary school teachers, her grandparents members of the Salvation Army. She respects institutions.

Her watchwords are stability and security. This will come as a relief to the Treasury which has seen six Chancellors barrel through its gilded halls since 2016, barely leaving a footprint — with the notable exception of Kwazi “Kamikaze” Kwarteng, who trashed the place.

By her own admission Reeves is a worrier. Some doubt she has the steel for high office. Too early to tell. She is certainly not a firebrand. “If you want someone to do cartwheels and tap dancing, I’m not your person,” she told The Guardian. “But if you want someone to run the economy, I’m quite well qualified.”

For a politician about to assume one of the great offices of state, Reeves is self-effacing to a fault. Like her boss, she is so close to power that she dare not jinx it by saying or doing the wrong thing. Neil Kinnock’s hubris in 1992 and his subsequent defeat lives on in Labour’s collective memory. Which is why there has been much trimming and tacking of policy recently.

Reeves will inherit the most powerful department in government by a country mile. Compared to the Treasury battalions, Number 10 can barely field a company. The Chancellor has the resources, the levers and the reach, to make or break policy. Which is why Prime Ministers, who complain incessantly that when they pull a lever nothing happens, are so dependent on their neighbour in Number 11. It’s the political make-or-break relationship par excellence.

For good or ill, the Chancellor operates across one of the most centralised political and financial landscapes in the world. Ministers come cap in hand to get their budgets approved by the Treasury. No other democratic state bureaucracy wields as much power.

At its best, the Treasury can be razor sharp. At its worst, it can behave like a constitutional Star Chamber, making fateful decisions about far-away communities it knows little of. At some point virtually every big financial decision – national or local – ends up for approval on a Treasury mandarin’s desk.

Which is daft. The Treasury is frighteningly young: the median age of civil servants is just over 33 – a decade younger than the average worker in the UK. Old timers in Whitehall refer to these young Turks as “His Majesty’s teenagers”. They’re bright enough. But their lack of lived experience is a handicap in making policy that works in the terraces and suburbs of Britain.

If it’s to deliver change the Treasury will have to loosen its grip on every nut and bolt of the economy. It will have to be persuaded to delegate, to devolve power down the line. Starmer has spoken of “challenging the hoarding of potential in our economy” by Westminster. He wants to “give power back and put communities in control”. Expect the mother of all rear-guard actions from the Treasury.

Reeves’s core belief is that the state has to find a way of doing things differently in tandem with the private sector. She rejects the idea that it should just get out of the way and let the free market rip. But she also rejects the notion that the state should drive change on its own.

The two great competing post-war ideologies — capitalism red in tooth and claw and social democracy’s tax and spend — have fallen plainly short in delivering even-handed prosperity. We are overrun by billionaires whose wealth makes them omnipotent while poverty becomes more entrenched.

Social democratic parties have sought, but largely failed, to find the elusive sweet spot.

Reeve’s ideas on carving a fresh path between free-market globalism and state intervention are sound but not wildly original. In Reeve’s vision the state would entice the private sector into investing more – for example in the green economy and Britain’s dilapidated infrastructure.

Reeves is seeking a new answer to an old question. Can the free market develop a social conscience? Mark Carney, former governor of the Bank of England and now advising Reeves, warns that economic policymaking and capitalism have become “disembedded” from society, treating consumers as products, not people.

It’s a big ask. The free market does what it does because that’s in its nature. Companies are responsible to their shareholders. Profit not social justice drives them.

Their relationship with government is hugely problematic. Government procurement is a sinkhole of greed and appalling value for money. The private sector won’t join Labour’s project out of mere altruism. How then?

Underpinning her efforts to corral the private sector is a root and branch shake-up of planning laws. Reeves concedes that planning reform has become a “byword for political timidity in the face of vested interests and a graveyard of economic ambition.” But, she says, there is no other choice. Does she have the courage to take on the vested interests?

Reeves overarching idea is economic security. Globalisation, which has delivered decades of cheap growth to rich economies, is on its last legs. The pandemic, war and strident nationalism have ushered in an age of uncertainty.

In this she has been influenced by President Joe Biden, who aims to grow the US economy “from the middle out and the bottom up, not the top down”. A combination of investment incentives and smart politics has transformed the southern state of Georgia, with a high poverty rate, into the electric car battery capital of America.

Canvassers on the doorstep in the run up to the local elections in May report that voters, above all else, want a stable job, a home they can afford and a stable government they can trust to deliver both.

The last few decades have been dominated by the neo-liberal ethic of light-touch regulation, flexible labour markets and the aspiration (rarely fulfilled) to keep taxes low. This has led simultaneously to more people in work but an explosion of in-work poverty.

Reeves wants to fix this. Expect to see a commitment to workers’ rights.

There is one gaping hole in the Reeves prospectus: poverty. Starmer and Reeves have rejected redistribution as a way of easing the pain of millions living in poverty — to the fury of the Left.

Stories of folk who have to choose between eating and heating are almost a cliché. Over 4 million children grow up in relative poverty in Britain. According to the Office for National Statistics the number of children below the poverty line jumped by 300,000 in a single year (2023). This is a stain on our country.

The word growth appears 58 times in Reeves’s recent, much-anticipated Mais lecture. Poverty barely figures. Those who wish the Starmer/Reeves project a fair wind say that stability must precede radicalism. The poor, the disabled, the elderly must wait in line.

Social democrats are prepared to give them the benefit of the doubt. Anything to rid the country of a party that has diminished and divided Britain like no other. But if tackling poverty isn’t at the heart of a Labour government’s programme, then it’s not a Labour government.

Most of these ideas have been tried before. Whether they work this time depends on how they are put into practice. Which begs the question: Reeves can think — but can she think outside the box?

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