London: Rachel Reeves became Britain’s first female finance minister on Friday, and the one-time junior chess champion’s opening gambit will be to try to spur growth without sacrificing the party’s newly minted image of fiscal responsibility.
A former Bank of England economist, Reeves, 45, was tasked in opposition with mending relations with the business community that were strained under left-wing former Labour leader Jeremy Corbyn, and pitching to voters that the party could be trusted with their money.
Appointed as Labour’s finance policy chief in 2021 after a tricky start to new prime minister Keir Starmer’s leadership, she has become synonymous with his approach of putting pragmatism ahead of ideology, and facing down those on the left who want a fiscally looser approach.
With Labour’s dominant election victory confirmed on Friday morning, she will now have to navigate a tricky fiscal picture and boost growth quickly if promised increases in investment are to be delivered without tax rises.
She said it was the “honour of my life” and a “historic responsibility” to be the first woman to be appointed Chancellor of the Exchequer, as Britain’s top economics and finance policymaker is titled.
“We’ve waited a long time to have the chance to serve our country. We have got a credible plan now to deliver the change the country needs. Growing our economy is at the heart of doing that,” Reeves told reporters on the sidelines of the party’s manifesto launch in Manchester.
“The opportunity to be Britain’s first female chancellor of the exchequer – that would give me immense pride, but also give me a huge responsibility: to pass on, to our daughters and our granddaughters, a fairer society. That’s what I’m determined to do.”
The inheritance from the Conservatives is far from rosy, with living standards stagnant since 2010, public debt at almost 100% of gross domestic product and taxes at their highest level since just after World War Two.
Sensitive to accusations from Conservatives that the previous Labour governments of Tony Blair and then Gordon Brown spent too much before the party left office in 2010, Reeves has been clear that all spending commitments must be fully funded.
She also has two “iron-clad” fiscal rules: that a Labour government won’t borrow for day-to-day spending, and that debt must be falling as a share of the economy by the fifth year of any forecast.
But that doesn’t rule out borrowing to invest, and she has said her vision – which she calls “securonomics” – takes inspiration from the policies of U.S. President Joe Biden.
That could see increased investment to shape strategically important markets, echoing the “modern supply-side economics” policies advocated by U.S. Treasury Secretary Janet Yellen.
Reeves has made political capital from the unfunded spending commitments of former Conservative Prime Minister Liz Truss that sparked turmoil in the UK bond market, and has cast Labour in contrast as the party of both business and prudence.
She has said Labour would give the Office for Budget Responsibility additional powers, noting with amusement that Labour Party activists gave the fiscal watchdog a huge round of applause at a party conference.
“The exhaustion of Conservative ideas does not give us the freedom to push through programmes detached from our present economic reality,” she told activists in a speech last year.
Reeves started her career at the Bank of England, turning down a job offer from investment bank Goldman Sachs because, she later said, she “believed in public service”.
At the BoE she worked on the Japan desk, analysing an economy hobbled by recession with low interest rates and quantitative easing which, she would later, joke resembled Britain in the 2010s.
She was also seconded to the British Embassy in Washington and British bank Halifax/Bank of Scotland (HBOS).
A business source who has dealt with Reeves said it was exciting to have a first female chancellor, and that Reeves was reflective and a good listener.
The source, who declined to be named to be able to speak more freely about party politics, said that Reeves was “earnest in her desire to effect change (and) expert on her understanding of the levers that business and government share” to achieve it.
The professional experience and economic outlook that has endeared her to business has, however, alienated her from the left of the Labour party.
Elected as a lawmaker for Leeds West in 2010, she held roles in then-leader Ed Miliband’s team covering finance and pension briefs, but was relegated to the backbenches under the leadership of left-winger Corbyn.
She has said it was “very difficult” to have activists shout “Red Tory” (Conservative) at her during a party conference after Corbyn was elected in 2015.
Momentum, a left-wing group formed to support Corbyn’s campaign to be leader, expressed scepticism over Reeves’ plans, especially the role she envisages for the private sector in fuelling investment.
“Labour now has a once in a generation opportunity to reshape Britain’s economy in favour of the many,” Momentum co-chair Kate Dove said.
“Concerningly, Rachel Reeves has thus far failed to explain how she will end the austerity policies that have had a catastrophic impact on society.”
In the Corbyn years, Reeves maintained a prominence outside of his frontbench team as chair of parliament’s business committee before Starmer appointed her as finance chief in 2021.
Born in 1979 in southeast London to Labour-voting – but not especially political – parents, Reeves has a younger sister Ellie who is also a Labour lawmaker.
Rachel Reeves credits her father and a primary school teacher for fuelling an interest in chess that saw her become British girls under-14 chess champion, which she said prepared her well for her career in politics.
“It’s about getting you to look ahead; to think strategically and not just tactically,” Reeves told the BBC in 2021, “and to think about what your opponent’s next move is going to be as well as your own.”
Published 05 July 2024, 16:09 IST
