Why Rachel Reeves is wise to look to Biden to inspire Labour

Labour’s new Shadow Chancellor, Rachel Reeves, has hit the ground running. Having taken over from Anneliese Dodds, Sir Keir Starmer’s first choice for the job and a respected social policy academic, Ms Reeves is moving fast to create some political energy around Labour’s economic policy.

Two days into her new job and she buried Sir Keir’s ultra-cautious line of pretending there is nothing more to say on Brexit and the slump in trade with Europe. She told the House of Commons in the Queen’s Speech debate that the well-reported problems faced by British firms, from cheesemakers to shellfish producers, in selling into their best market across the Channel, needed to be addressed.

She has hired the economist Mariana Mazzucato, already a key adviser to Jeremy Corbyn’s Shadow Chancellor, John McDonnell. An Italian-American, she has a chair at University College, London and is a prolific writer and broadcaster. Professor Mazzucato has taught at British, European and US universities and is best known for advocating a stronger role for the state in economic life.

This is not old-fashioned nationalisation or central planning. Mazzucato’s favourite metaphor is the US putting astronauts on the moon, which required both massive investment in private sector technology firms and a clear sense of the national interest.

To be sure, in the last four decades since the arrival of Ronald Reagan and Margaret Thatcher, such thinking has been out of fashion and generally derided by the establishment of economic commentators. But today the newspapers and journals read by policymakers in the US, UK and Europe are full of a new paradigm about the borrowing and investing to “level up” — the favourite metaphor of the Prime Minister. Boris Johnson is promising a new economic and jobs renaissance in de-industrialised northern England, 180 degrees different — at least in rhetoric — from the cautious and conservative New Labour economic policy when Gordon Brown was Chancellor and Prime Minister.

Still only 41, Ms Reeves has packed a great deal of political experience into her life. Brought up in the then unfashionable South London district of Lewisham, she was a junior chess champion and took degrees at Oxford and the LSE before working at the Bank of England. She first stood for Parliament aged just 26, and landed a safe Labour seat in Leeds in 2010.

The then Labour leader, Ed Miliband, put her quickly into the Shadow Cabinet before she had had much experience in the Commons. At times this showed, but she kept a steady head. Unlike the other star Labour newby of 2010, Chuka Umunna, also catapulted onto the front bench without serving a Commons apprenticeship, Ms Reeves stayed put during the lost Corbyn years.

While Umunna was seeking a high profile as leader of the People’s Vote campaign for a new Brexit referendum, before quitting Labour to form a new party and later joining the Liberal Democrats, thus throwing away a safe Commons seat, Ms Reeves took over the Business and Industry Select Committee. This allowed her to forge a Commons profile as a serious parliamentarian and keep well away from the internal Labour Party wars of the Corbyn era.

Unlike her boss, Sir Keir Starmer, who only took up an interest in active Labour politics in his fifties, when a safe seat presented itself in the constituency where he lived, Ms Reeves is more like a Churchill or a Blair, someone who took politics seriously as a full-time profession at an early age.

Her sister Ellie, a fellow MP who is also married to a Labour MP, is one of the most popular speakers at Labour Party events up and down the country. Rachel Reeves has two children with a high-flying civil servant who had been speechwriter and private secretary to Gordon Brown. In short, she is an alpha political animal with intellectual depth and high-level experience.

Now she plans to go to the US to talk to President Biden’s economic policy team. Back in January 1993, I helped organise a major centre-Left economic policy conference at the QE2 Centre. Called Clintonomics”, it brought over to London all the key economic policy advisers to the newly-elected US President, a former Rhodes Scholar at Oxford and the global leader of the centre-Left.

In fact, the structures of the US economy and the levers available to a President to pull are very different from the UK. The main takeaway from the American experience for Gordon Brown was the Earned Income Tax Credit, a state subsidy for low-paid workers. It was introduced to the US by Jimmy Carter in 1978. Republicans liked it as it kept low-pay employers in business. Democrats liked it too as it raised the income of unskilled workers.

In Britain it was given a new format by Brown’s Treasury, as the Working Family Tax Credit, which churned millions into work after 1997, but at the price of ever lower productivity as employers just hired low-paid workers, often from Ireland or the EU, rather than invest in training and upskilling.

President Biden refers to “union” jobs, which he says his spending programme will create. US labour unions were supportive of Biden, unlike some of the biggest British trade unions whose leaders give the impression they can dictate to MPs and bend the Labour Party to their desires. We will see what Biden-inspired ideas Ms Reeves comes home with. But she has packed into her eleven years in the Commons more high-octane politics and experience than many a minister much older in age.

In the aftermath of the Hartlepool by-election and the poor poll showing for Labour and Sir Keir Starmer, the appointment of Ms Reeves to her new job as Shadow Chancellor passed without much notice. But, as with Gordon Brown emerging after the 1992 defeat in the same role, having someone as able and hungry for real power and responsibility as Rachel Reeves should worry those Tories who think they are entitled to stay in office in perpetuity.

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