History will not be kind to the Chancellor, if anyone will even remember her
Daily Telegraph 22/06/26
It could be Wes Streeting, Yvette Cooper, Pat McFadden, or even, if no one has bothered to check the reaction of the bond markets, Ed Miliband.
As Andy Burnham contemplates his new cabinet, assuming he becomes prime minister by the end of the summer, there are plenty of candidates for chancellor.
One name has been firmly ruled out, however. The incumbent, Rachel Reeves. And it is not hard to understand why.
In reality, the first woman at No 11 doomed herself with a catastrophic first Budget. Once that started to unravel, it was impossible for her to recover – and she will depart with a reputation in ruins.
Rewind a couple of years, and it all looked very different. With a large Labour majority, Reeves sold herself as a great reforming Chancellor: a brilliant economist, with the enthusiastic support of business and the City, she was ready to implement a bold plan to turn Britain into the fastest-growing economy in the G7.
Not only would she shatter the glass ceiling, she would “fix the foundations” of the British economy, and repair the damage of years of Tory austerity.
There was nothing wrong with the scale of her ambition and there was plenty that needed fixing. The trouble was, however, it quickly became very clear she didn’t have the first clue how to go about it.
Reeves made two big decisions in her first Budget.
She imposed a major rise in tax, increasing the amount of National Insurance that employers have to pay for each member of staff, along with more minor, but equally damaging raids, such as clamping down on non-doms, and imposing extra capital gains taxes on farmers, entrepreneurs and family businesses.
This was alongside a dramatic increase in borrowing, adding an extra £140bn during the life of this parliament.
Cheered on by a handful of Left-wing academics and high-tax fanatics, the bet was that all this extra spending would turbo-charge growth, allowing it to be easily paid back, while creating the kind of dynamic, high-wage country the party wanted.
It might have worked at a Fabian Society seminar.
Unfortunately, out in the real world, it was always going to prove a catastrophe.
For all her supposed economic expertise, Reeves had never figured out that taxes impact the way we behave, or that government borrowing crowds out the private sector.
Companies responded to the tax rises, perfectly rationally, by cutting back on the numbers of staff. The bond markets responded to being asked to lend a lot more by demanding higher interest rates, which pushed up the cost of the national debt (now running at an alarming £125bn a year).
Meanwhile, the non-doms decided that, all things considered, they would rather not pay Britain’s punishing inheritance taxes, and headed for Milan or Monaco, while the farmers and family businesses realised they would have to sell up or close down as quickly as possible.
Within six months, it became horribly clear it had gone wrong.
Hiring plummeted, and unemployment started to rise. Businesses on the high street and in hospitality closed at record rates. Output stagnated, and confidence evaporated.
Instead of reversing course, as she could have, Reeves doubled down with a farcical second Budget that involved dozens of leaked tax rises, an emergency press conference to announce she was breaking a manifesto pledge, followed by a quick reversal, before settling on substantial rises in business rates that turned into yet another punishment-beating for private enterprise.
By then it was too late. Reeves’s fate was surely sealed.
History, if it remembers her at all, will not be kind to Reeves.
There have only been four Labour chancellors over the last 50 years (compared to nine Tories); Denis Healey, Gordon Brown, Alistair Darling and Rachel Reeves. The other three had plenty of faults, but were in their own way substantial politicians, who left a genuine legacy. Reeves has nothing to show for her time in No 11 apart from boarded-up shops, a looming debt crisis and surging unemployment, especially for young people struggling to start their careers.
It will be very hard for her successor, whoever it is, to clear up the wreckage she leaves behind.
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