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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
There are some images that cannot be unseen. A crying chancellor is one of them. A politician who encouraged people to style her as an iron finance chief simply cannot afford to show that kind of vulnerability.
It may indeed be true, as her allies suggested, that there is an unspecified personal matter that actually got to Rachel Reeves. There was also talk of an altercation with the Speaker. It’s unfair but some images are defining, whatever the nuance.
The first anniversary of Labour’s victory has been marked by a self-inflicted shambles which has shredded the authority of both the prime minister and his chancellor and which culminated in ministers driving through a welfare-reform bill so gutted of content that it no longer saves any money. Reeves took a hard line in pressing for cuts and must own her share of this.
But Keir Starmer bears more of the blame for the wreckage. Anyone with a feel for the Labour party — a list that ought to include its leader — knows its visceral resistance to cutting disability benefits. A rebellion was inevitable but Team Starmer ignored all warnings that it was spinning out of control or that there were serious flaws in the legislation. He compounded the error by explaining he had been distracted by foreign affairs and the, admittedly unnerving, arson attack on his former home. But prime ministers have to be able to manage more than one problem at a time.
Finally, he failed to stand by his chancellor in parliament when challenged to do so. Talk of Reeves’ departure looks premature. This may owe more to Starmer’s flat-footedness in responding to questions — Downing Street did then race to put the toothpaste back in the tube — but it compounded the sense of a leader with no political touch.
The consequence is a prime minister untrusted by his MPs and now with diminished authority, a suddenly beleaguered chancellor forced to find extra money and a government that appears unable to carry through difficult but far from revolutionary reform even with a huge parliamentary majority. So much for the restoration of stability and technocratic calm.
Reeves’ problem is that her fingerprints are at the scene of almost all the incidents that Labour MPs believe to be foundational errors; from the now reversed move to means test pensioner winter fuel payments to this week’s welfare revolt. But one reason she is under so much pressure is that a financially unbending chancellor needs a politically acute prime minister to complement and restrain them. Starmer is not that man.
The pair are blamed by critics for pulling the party rightward, for the electoral caution that led Labour to rule out personal tax rises and for the fiscal discipline that is ludicrously described by those on the left as austerity. Along with Starmer’s chief of staff, Morgan McSweeney, they are also regarded as key in rooting out the Corbynite left.
And this points to the more far-reaching concerns, now spooking the gilts markets as investors contemplate the financial implications of the defeat and Starmer’s failure to back Reeves immediately.
Though MPs might not wish to admit it, the dull but reassuring Starmer/Reeves combination was central to getting Labour over the line. You have to go back to 1966 to find a clear Labour election victory not built on the implicit promise that the leader would protect voters from the leftish instincts of their party.
But the pair have lost their hold over the party. Investors can see a darkening economic picture and a chancellor who will need more revenue in tax rises. A notable test will be whether Starmer now postpones plans to scrap the so-called two-child cap on welfare payments to larger families, something his MPs are demanding but which is now harder to afford.
Markets see Labour’s soft-left reasserting itself. They note the renewed pressure on the prime minister. Tellingly Andy Burnham, the charismatic mayor of Manchester, popped up on schedule to offer moral support to those Starmer was struggling to restrain. And Starmer has been chastened by complaints he has been chasing Reform UK voters since the local election defeat in May.
Downing Street allies deny this charge. They say that in the expansion of social housing, the employment rights bill, measures on free school meals and breakfast clubs, Starmer is showing a “true Labour” agenda and that there will be more in the coming months. Their analysis is that Labour lost far more votes to abstention and other parties of the left than they did to Reform.
The unveiling on Thursday of the 10-year NHS plan offers a chance to refocus but the next Budget already looks a defining moment. Can Reeves stick to her fiscal discipline? How can she restore economic confidence? What kind of tax rises does this portend? What hope now of further spending restraint? What will a government trying to play up its real Labour credentials look like?
There will be those saying that Starmer has to cut Reeves loose. But there are three arguments against this. First, Reeves is doing the job she has been asked to do and someone has to worry about the public finances. Second, Starmer deserves more of the blame for the welfare fiasco and third, premiers forced to dump their chancellors rarely recover. In any case, those mentioned as alternatives, Pat McFadden and Yvette Cooper, are unlikely to offer a significant shift in stance.
Voters and markets trusted Labour because of the promise of restraint. The deeper concern is that “one thing at a time” Starmer is no longer strong enough to control a party pulling leftward and seems unable to articulate an overarching purpose that persuades MPs to get behind the difficult decisions. If the double act is not working, the core problem may not be Reeves.
This government has unravelled at a frightening pace and there are still four years till the next election. It feels as if we are already mourning a lost government. And these are unlikely to be the last tears shed.
