Rachel Reeves told her voters this week that she “listened.” If so, she’ll know they’re not impressed: beyond her miserable winter fuel payment policy, but beyond her performance since taking office.
As she prepares to set up her spending review on Wednesday, the first prime minister of nearly 15 years of workers knows this is a critical moment for both the Kiel Star government and her own position.
Few residents of 11 Downing Street have seen approval ratings plummet. Polls suggest that at the fate of 2022, former conservative prime minister Kwasi Kwarten is surrounded by the unpopular deep byte previously occupied by.
Reeves’ juxtaposition to remove fuel subsidies from 100,000 pensioners last July created a revelation around her about receiving her giveaway. “That’s when people make moral judgments on us,” the newly elected Labour MP said.
Her fall budget created a new well of hostility with a £25 billion business tax rise. Meanwhile, Labour MPs have rebounded from their £5 billion plan to cut welfare payments for people with illnesses and disabilities.
“She is brave enough and honest enough to make tough decisions,” said one colleague. “She knew it would make her unpopular.”
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The big question this week is whether Reeves can start to turn things around.
The spending review is a moment when Reeves and the government show that they really care. Money is allocated to departments and capital projects for the remainder of the Congress. Your choices will reveal your priorities.
For Reeves, this is an opportunity to show that she is obsessed with financial rules, but she has a vision for the country and is obsessed with financial rules, in order to shake it up from the growth that has been on the rise for nearly 20 years.
Complete U-turns on this week’s winter fuel policy – restoring benefits to most pensioners is the first step in what Reeves hopes to be a moment of her prime minister’s reset.
Her core message on Wednesday was that the “choice” she made was to create confidence in the fiscal space and market, including grasping daily spending, adding £113 billion for capital spending than Congress.
“The idea that she is George Osborne in disguise is ridiculous,” the prime minister’s allies said, referring to the former Conservative Prime Minister, who presided over austerity policies in the early 2010s. “This is definitely not a review of austerity spending.”
Overall daily spending increases by 1.2% each year in other legislatures. Health and defense spending will engulf the lion’s share of extra cash, leaving a real cut in some “unprotected” sectors.
Reeves would argue that this is wise, but not strict, financial management. She would say that current spending would be £190 billion more in Parliament than in Tory. Her first budget saw her rise by £400 billion a year and £28 billion a year.
However, Reeves’ focus lies in extra spending on capital aimed at increasing the UK’s growth potential as the Prime Minister moves from Scrooge to Ready Bountiful. Nuclear power plants, rail schemes, roads and homes are all bombarded with borrowed cash.
The prime minister’s team believes Reeves has already turned the corner in terms of her perception in the Labour Party after he began a long retreat on winter fuel payments, suggesting that further softening of welfare policy is ongoing.
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According to the Labourlist website, she has improved her approval rate from 13% points to just minus 27.8 over the past two months, but she remains the least popular member of the Labour Party.
But some believe she is still in trouble, while others believe her retreat for winter fuel payments remains vulnerable to pressure on other controversial issues, such as a £5 billion plan to cut down the country’s bloated welfare bill.
“Winter fuel U-turns are useful in the short term, but they undermine her in the medium term when it comes to her authority and ability to obtain welfare reform packages through unrevised,” Wang Labour Grandi said.
Reeves’ team struggles to distinguish between winter fuel U-turns, which the prime minister says he has “heared people’s concerns,” and the willingness to succumb to concerns raised by Labour lawmakers.
For example, the prime minister has been under intense pressure from Labour lawmakers to end the benefits cap for two children, but one colleague noted that the restrictions are popular with many voters. “We have to prioritize,” they said. “Voters are not in the same place as the party.”
They argue that while members of the public clearly have not voted in the House, the public is far more sympathetic than Labour lawmakers for their resolve to cut Reeves’ welfare spending. The big parliamentary battle comes first.
Former Shadow Prime Minister John McDonnell, now an independent MP, said Reeves had another problem. Wednesday’s big announcement on capital expenditures may not bring the political dividends she expects.
“While capital expenditures take years to produce political outcomes, the reduction in revenue expenditures on services like council services feels quick,” he said. Reeves told colleagues that the public is already embracing pre-released plans to boost local transportation schemes.
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Meanwhile, Reeves has been hit by external events, particularly US President Donald Trump’s trade war and global borrowing costs, which has been heavily exposed ahead of this fall budget. Her £9.9 billion “headroom” against her own borrowing rules is thin.
GDP in the first quarter was stronger than expected, but this has been mitigated by predictive downgrades from organizations including the IMF and OECD.
Cathal Kennedy, a senior UK economist at RBC Capital Markets, warned immediately that spending reviews would break out of the rising budget “speculation machines” as investors debate the prospects for a new tax hike.
Making the issue even more difficult is Reeves’ decision to rule out personal tax hikes for large VAT, income tax and employee national insurance tickets, forcing the Treasury to consider narrower targeting measures. “None of this will encourage long-term decision-making,” he said.
Ruth Gregory of Capital Economics agreed:
British reform leader Nigel Farage recently claimed he never saw as Reeves “someone who’s so hopelessly out of their depths,” but the prime minister now tastes the solid support of a more relevant party leader.
“Kiel is 100% behind Rachel,” said one of the prime minister’s allies. A senior Labour MP and former minister said, “Her position is absolutely fine. For now, her challenge is voters. Labour voters can’t stand her to flirt with reforms now.”
Reeves says she “heard” what people are saying, and on Wednesday she responds. Her decision in the spending review provides a platform for workers’ next election campaign. The solidity of the platform is about to be tested.
“We know that voters are desperate for change, but I think the plan is working,” said a colleague of the prime minister. “Rachel loves nothing but proves people who underestimate her mistakes.”
Data visualization by Amy Bollett and Jonathan Vincent
