Embattled Labour PM Keir Starmer isn’t the only one losing his authority. Reeves has seen hers shredded. She wrapped herself in the language of “iron discipline” and tried to channel Gordon Brown, but her big calls are unravelling fast. Starmer has already forced her into two humiliating U-turns.
First came the backpedal on scrapping the winter fuel payment for better-off pensioners. Now we have the retreat on disability benefits after a backbench revolt. Reeves is also eyeing a reversal on her tax grab from wealthy non-doms, as firms and high earners flee the country.
The damage is done. Britain needs capital, not capital flight. Even the Bank of England no longer buys her spin. And governor Andrew Bailey has taken the rare step of calling her out in public. That’s how far she’s fallen.
Talk about awkward. But even he’s had enough.
Even a cautious establishment insider Bailey has run out of patience. He doesn’t go looking for fights but Reeves has pushed him too far.
Her Spring Statement in March was fantasy politics. She claimed to have “restored stability to our public finances” and even credited herself with giving the Bank of England “the foundation to cut interest rates”.
Reeves said the economy was “beginning to turn a corner”. She boasted of “fixing the foundations” and delivering “a decade of national renewal”.
I don’t know how she could say that with a straight face as growth stalls, taxes hit record highs, jobs are destroyed and her own MPs block any attempt to rein in ballooning welfare costs.
It was nonsense then, and it looks even more ridiculous now. And Bailey has picked it all apart.
Speaking at the British Chambers of Commerce yesterday, he demolished her narrative.
While the economy did grow 0.7% in the first three months of the year, that was a one-off, fuelled by homebuyers rushing to beat the end of the stamp duty holiday in March, and businesses racing to escape Trump’s tariffs.
The economy shrank by 0.3% in April and it’s not getting better. The “corner” Reeves claimed to turn has turned straight into a dead end.
Bailey warned that growth is slowing, the labour market is softening, and firms are cutting jobs and wages to cope with Reeves’s £25billion National Insurance tax grab.
Meanwhile, foreign investment is in freefall, with project numbers plunging to a record low.
Inflation looks stuck at around 3.5%, meaning those interest rate cuts Reeves took credit for will slow or stop altogether. Will she take the blame, too?
Business leaders aren’t waiting to find out. Shevaun Haviland of the BCC has warned her not to raise taxes again, branding the strategy “counterproductive”. The Institute of Economic Affairs says almost nothing has improved since Labour took office.
Rachel Reeves may prefer the fantasy version of events she keeps reciting. But the Bank of England has dragged her back to planet earth. The reality is stark. This Chancellor isn’t up to the job.