Rachel Reeves says it is her pre-election promise – to balance the books – that Labour must deliver. But twenty other cabinet ministers also made promises – and are being denied the chance to deliver them by Reeves. How long is it before they oust her?
This is the audio version:
This is the transcript:
When will Labour ministers in the UK stage their coup against Rachel Reeves?
I ask the question because it is clear that there is a crisis coming for the current Labour government. Labour ministers, who've worked for years to secure their cabinet offices, are going to have to face a choice. They're either going to deliver on the promises that they made to the UK electorate, that the people of the UK would enjoy better services under Labour, or they're going to support Rachel Reeves to deliver her promise to the UK electorate, which was that she would balance the UK budget. There isn't an option of doing both.
That's the crisis that Labour faces. It can either balance its budgets and impose austerity, given the other decisions that Rachel Reeves has made, such as not increasing tax and having a fiscal rule which makes absolutely no sense at all, or we could have improved public services. But we can't have both.
So, those ministers are going to face a particularly difficult choice. Right now, it seems that Keir Starmer is backing Rachel Reeves. That's unsurprising. This far into a parliament, Keir Starmer could not abandon his Chancellor and continue to look credible himself. After all, he chose her, he got elected on a platform with her, and he made her his chief minister, in effect. The deputy prime minister, Angela Rayner, is nowhere in his order of priorities compared to Rachel Reeves.
But, she's obviously failing. And it cannot be that Labour ministers have not noticed that failure by Rachel Reeves.
They are ambitious people. They want high office themselves. You can be almost certain that some of them fancy themselves in the role of Chancellor. And they will have noticed that things have not gone too well for Rachel Reeves since she got into office.
She delayed having a budget quite unnecessarily.
She caused crises for them, particularly in the NHS, by delaying payments to ministers who needed it to keep services going.
And when she delivered that budget, it was, let's be honest, a complete economic and PR disaster. The increase in the cost of employment that was created by imposing an additional National Insurance charge literally created a total hostage to fortune for Labour, and frankly, an unanticipated cost for UK businesses that will have an impact on economic growth.
The overall net outcome? Absolutely negative.
And, the public has noticed it.
Now financial markets have, and they are gunning for Rachel Reeves.
So, what are Labour ministers going to do? They appear as if they're being compliant, but not quite. Wes Streeting - hardly the world's idea of a rebel -
said that he was embarrassed and even distressed by the quality of service that the NHS was supplying to the UK public. Why did he do that? Because he explained he had not been able to get additional money into the NHS to support its services this winter. Hidden deep in that comment, there was a definite sideswipe at Rachel Reeves.
At the same time, there are other ministers rumbling about the fact that they, too, are struggling. For example, it seems likely that this is happening in education and elsewhere, with consequences that there are noises sufficient to be heard to suggest that not all is exactly calm and easy in that Labour cabinet.
Sometime soon, when things continue to go wrong, and when Rachel Reeves demands that there be a long-term economic review of government spending, which can only deliver austerity on the basis of current economic forecasts, there will be a backlash.
There will be ministers who will have to make a choice.
They either choose to deliver something that goes against every instinct they had when they did years ago, begin to climb the slippery pole to cabinet office, or they agree to be obedient to Starmer and Reeves and deliver something that goes against every instinct they have, which is to deliver better public services.
I believe enough of them will be angry enough to topple Rachel Reeves sometime well within a year at the current rate of progress. Come the autumn, she's going to look like a lame duck. Keir Starmer is a ruthless man. We know that. Look at the way he treated Corbyn and his followers. He's not going to sit around for longer than he has to with a lame-duck chancellor.
So, Rachel Reeves' days are numbered. Days that are numbered precisely because her own cabinet colleagues will want to be rid of her.
Will her career as a senior minister be over? No, almost certainly not. She will be given some other job, who knows what, and I don't really care, but she will be taken out of the economic role which she always craved.
And she'll be taken out of it for one good reason. She's really making a total mess of it.
And the new incoming Chancellor, will they do any better? Only if they decide to do three things.
- Abandon fiscal rules, which are totally unnecessary and absolutely contradictory to good economic management.
- To spend more to meet demand, and
- To be willing to tax more, or borrow more, or possibly both, to ensure that that demand for additional public services, which are absolutely critical to the well-being of the UK, are met and they are met and paid for by people who have an excess of resources now because it is impossible to impose more tax on the lower paid working people of the UK without serious harm happening.
So that new Labour Chancellor, whenever they happen, will have the choice; borrow more by all means, but tax more. And that will mean taxing the wealthy. Unless there's radical reform to Labour's approach, they have no hope in the 2029 general election. But I think we can be quite sure that Rachel Reeves will not be Chancellor by then.
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Like any business, when the accountants start to make all the decisions, things are going very wrong (no disrespect, Richard :). The change we need is not just to replace the chief accountant (again), but a structural change. For far too long the Treasury tail has been wagging the Government dog. It’s long past time that the Treasury was demoted: seen not as the senior department, but as the function that enables all the other Departments to do their jobs.
Agreed
A business without financial control eventually goes bust. I’ve been involved in many business administrations and the main cause of failure was over optimistic sales people overruling the finance guys.
That said I agree with your main premise. It seems to me that The Treasury is driving the bus and the rest have to go along with it. Ultimately The Treasury should act as scorekeeper and it should be Starmer calling the shots.
A fair point. Some financial prudence is always necessary (and often lacking). But the question should never be “can we afford it?”, but rather “HOW can we afford it?”
Thank you and well said, Kim.
Not just demoted, but broken into two or three ministries, economy, financial control and, perhaps, economic development.
Agreed
Agreed too.
The Chancellor of Exchequer yields far too much power, and such concentrated power becomes a focus of access in order to control for malignant forces and so much easier for the City to have ‘our man or woman’ on the inside.
We need more balance as The Colonel suggests.
According to media reports, on his jolly to Kiev, Starmer has promised Ukraine £3bn a year until at least 2031, plus all sorts of other commitments. Where is this money going to come from?
Where all UK government money comes from.
Yes, i know that. But Starmer and Reeves claim the so-called black hole prevents them from spending more on health, pensioners and other social and welfare benefits. How come they can find 3 bn for Ukraine ahead of support for the health and welfare of their electorate? They clearly take the electorate for fools.
Reform would have you believe that you need to dig it out of the ground…
Ben bernanke was asked exactly the same question by a US congressman, that is, where the money comes from. Bernanke, as head of the Fed, replied that we (meaning, the Fed) create it out of thin air.
Correct
I really hope this is not true. Ukraine and Gaza both need to rebuilt. The majority of the cost of both should be borne by the US who are ultimately responsible for the cause of both conflicts. I’d be unhappy if Starmer gave a £ more to Ukraine than Gaza.
Thank you, John.
That bung will come in handy as Mrs Z was spotted at St Moritz yesterday. ‘Tis the season.
Colonel, what was she doing?
Well, for a start, try reading Richard’s Taxing Wealth Report 2024, available from this blog.
Plenty of ways in which extra tax can be raised in there. Certainly well in excess of £3bn.
UK governments always find money for wars and to support the wealthy who, in turn, make them personally wealthy. They’re a self-serving lot, on the whole.
It was Harry Truman who apparently said “Show me a man that gets rich by being a politician and I’ll show you a crook.” Well he would say that, he was probably a crook himself, since there were rumblings of corruption about his administration.
It’s the children, the elderly and the people of the UK, in general, who get crumbs from the table – the “little people” – if they’re lucky.
Labour, what ever happens to Reeves, is likely to continue with its focus group sound bite approach to government.
Labour does not have any noticeable plan, apart from more austerity, that has any aim of actually improving the life of UK residents.
Disaster looms for no steer Keir at the next election. He may, if extremely lucky, just cling on to a slim majority.
Thank you, Richard.
What are you hearing from backbench contacts?
I caught up briefly with two friends yesterday. They are involved in construction and retail. Both expect the flatlining to continue for years.
Many realise they are one-term MPs.
Many know this is not why they became MPs.
Most are frightened to comment.
Thank you, Richard.
My MP, Laura Kyrke-Smith, is unlikely to win next time. I don’t know if she’s bothered as she, a friend of David Miliband, supports the Reeves agenda.
Reeves is at it again today. She’s on the BBC Politics podcast and talking about her mum budgeting to Nick Robinson.
I will take a look, later
I am discovering retiring involves a lot of work.
The Rachel Reeves interview will be live on Radio 4 at 5:30pm today: https://www.bbc.co.uk/schedules/p00fzl7j/2025/01/18
Due to the BBC’s digital-first quirks of scheduling, it is also available now on Sounds: https://www.bbc.co.uk/sounds/play/m00274r2
I agree with your blog. Reeves days are numbered because she is incompetent, is currently running the economy into the ground, and seems set to impose more, destructive, austerity. I really hope you are right that her cabinet colleagues will not continue to tolerate her for long. I think many Labour supporters hoped that Labour would change and deliver some progressive policies, rather than continued neoliberalism, once in office. This can only happen if Reeves goes.
The money society requires can only come from tax or borrowing. Your taxing wealth report suggests many sensible progressive taxes. That is probably only part of the answer. That’s because some of Reeves tax changes need reversing (such as the employer NI, and winter fuel allowance). So borrowing may be needed. But borrowing via the usual mechanism of gilts makes no sense as it pushes up interest rates. We could, as you suggest, try to harness UK savings rather than have them unproductively gambled on the stock exchange. I would suggest a further source which is immediately available and need not push up interest rates. That is to borrow directly from the bank of England (essentially directly money creation not mediated by the sham of Quantatitive Easing).
Whatever, Reeves must go. There are plenty of ways forward if the government has the courage to take the many available options.
@Tim Kent
QUOTE
I would suggest a further source which is immediately available and need not push up interest rates. That is to borrow directly from the bank of England (essentially directly money creation) […]
END QUOTE
Are you aware of the legislation that says that is the only way government can fund its spending?
https://www.legislation.gov.uk/ukpga/Vict/29-30/39/introduction
“11. All moneys paid into the Bank of England on account of the Exchequer shall be considered by the Governor and Company of the said Bank as forming one general fund in its books; and all orders directed by the Treasury to the Bank for issues out of credits […] shall be satisfied out of such general fund. […]
“15. (1)This section applies in respect of sums which Parliament has authorised, by Act or resolution of the House of Commons, to be issued out of the Consolidated Fund.
(2)The Comptroller and Auditor General shall, on receipt of a requisition from the Treasury, grant the Treasury a credit on the Exchequer account at the Bank of England (or on its growing balance).”
Any “borrowing” via gilts and bonds is simply shuffling the money the government created in the past that has found its way, unspent, into our savings. The original money was created by taking *credit* from the Bank of England.
International banking doesn’t like the idea of Overt Monetary Financing of an economy so we see and hear of all the consequences of the BoE’s shenanigans to hide how it moves money around, but we don’t hear that the sovereign power to *create* money lies with Parliament borrowing from the the government’s own and owned Central Bank (subject to the convention that it always passes government finance bills).
If you *are* aware of the Law, Tim Kent, I hope this brief piece will enlighten new readers to the blog. I always fear “teaching my grandma to suck eggs”.
My MP is a junior minister. I spent the last couple of days composing a letter to them, pointing this out, and trying to reference every point of significance, often to this blog. Emailed it in now. Whether they see the letter or not I don’t know, but I’ve tried.
Thanks
My next project is my letter to financial journalists/finance editors about their supine approach to interviewing politicians on economic matters. The letter is written – it’s trying to find out ways of sending it that is the challenge. I may have to resort to stamps and envelopes. These journalists are mostly fairly inaccessible.
Any assistance on email addresses would be welcome. Obviously only if they are publicly available, I don’t want anyone doxed!
(even Inboxes for organisations would be helpful.
I’ve managed to compile my list of names but almost none of them publish professional contact addresses.
Or tell me where to look if you know where addresses are published.
The letter is not really suitable for web-forms, it would be over their character limits and I don’t trust the security on web-forms.
I cannot break GDPR
My MP is a right wing Tory. I’ve sent him so many critical emails that he no longer replies!
I fully agree about the Treasury. They are a drag on our economy. There’s a particular mindset which has lasted for over a century. Lloyd George is said to be the only politician who could tame/ignore them.
Thank you, Richard.
It will be in interesting to hear your thoughts of the Reeves interview by Nick Robinson and the nonsense she spouts, perhaps even a reply on X.
One must also ask why this interview was arranged and the bit about her mum budgeting trailed?
Is Reeves feeling the heat? She looks nervous on tv and is reported to be tetchy.
I will try to look later
Apropos the interview with Nick Robinson, she admits to helping herself to/walking off with uneaten pastries after official meetings (portraying herself as against waste). Is that not petty theft? If we are to believe her mantra about learning how to budget from her divorced mother, the fact that there are leftovers suggests the lesson should be to order fewer pastries next time to better manage the department budget.
Of her many faults, I think this one is inconsequential.
Liz Truss’s answer to the problem of ordering too many pastries was to have a “Fizz with Liz” party at an expensive club.
“Fizzcal” rules didn’t apply.
https://www.thenational.scot/news/20599734.liz-truss-pressure-undeclared-fizz-liz-champagne-dinner-mps/
I remember reading about an office cleaner who got sacked for taking home or eating left-over sandwiches.
https://www.lbc.co.uk/news/cleaner-fired-taking-leftover-sandwich-criticises-unfair-bosses/
One rule for the many….
Thank you to Larry, above.
At this time of year, some wealthy Russians and Ukrainians head to the slopes in Switzerland and France. I don’t know if Mrs Zelenska skis.
But is it really her, or is Keir Starmer the evil puppetmaster appointing cronies?
Rachel isn’t an agent for/of crony capitalism. Her rise to the position she has now was very organic. She came from the established technocracy of our state. She perfectly represents the interests of those in the BoE and the treasury.
She isn’t really a politician.
Patrick Dunleavey puffing up Reeves’ advisor Van reenen
https://www.theguardian.com/business/2025/jan/17/economist-shaping-rachel-reeves-growth-plans-john-van-reenen
Suggests there is a sort of strategy – wants to raise investmetn and rejoin EU SM – but still seems to rely on private sector.
He was saying similar things in 2010 apparently but we have had 14 years of wrecking – so must now need a post-WWII -level revolutionary approach.
A bear without the brain to ask why UK capital is saved, and not invested (answer, the wrong tax incentives), or why we want growth – which is an epiphenomenon and never tangible in its own right, whilst being decidedly dangerous in some situations (think of the growth of cancer cells). Also unable to imagine public sector growth delivering what is actually required – because the focus is on markets. So that useful? I doubt it.
‘To spend more to meet demand’ or
To spend more to create demand?
Regards
How will Labour oust Reeves? When they can produce a plausible explanation for it.
I have the answer! As the SpaceX rocket debris tumbles to earth, and flights round the world are affected ,; how does Musk’s operation explain the mess raining down? By SpaceX comms., calling it a “rapid unscheduled disassembly”.
So now we have the viable explanation for Reeves being sacked; or rather engaging in a cordial and frank rapid unscheduled Cabinet disassembly.