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Chancellorship of Rachel Reeves

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Rachel Reeves' tenure at HM Treasury (2024–present)

Rachel ReevesOfficial portrait, July 2024
Chancellorship of Rachel Reeves
5 July 2024 – present
ChancellorRachel Reeves
PartyLabour
Election2024
Nominated bySir Keir Starmer
Appointed byCharles III
Seat11 Downing Street
← Jeremy Hunt

Rachel Reeves became Chancellor of the Exchequer on 5 July 2024, upon her appointment by Prime Minister Keir Starmer, following Labour's victory in the 2024 general election. She succeeded Conservative chancellor Jeremy Hunt, and became the first woman to hold the office of Chancellor in its 708-year history.

In this role she has adhered to "modern supply-side economics", an economic policy that focuses on infrastructure, education and labour supply by rejecting tax cuts and deregulation. It is heavily inspired by Joe Biden's economic policy, particularly his Inflation Reduction Act. She coined the term securonomics in 2023 to refer to her version of this economic policy.

Background

Main article: 2024 United Kingdom general election

Rachel Reeves was appointed Shadow Chancellor in May 2021, following a shadow cabinet reshuffle. Over her three years in office, Reeves proposed to scrap tuition fees, no re-introduction in a cap on bankers' bonuses, and a plan to nationalise the railways.

Securonomics

This article is part of
a series about
Rachel Reeves
Chancellor of the Exchequer (2024–present)
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Since 2022, Reeves has adhered to "modern supply-side economics", an economic policy which focuses on infrastructure, education and labour supply by rejecting tax cuts and deregulation. In May 2023, Reeves coined the term "securonomics" to refer to her version of this economic policy, originally in a public address at the Peterson Institute for International Economics. It is heavily inspired by US president Joe Biden's economic policy, particularly his Inflation Reduction Act.

Securonomics is based on the belief that globalisation has failed to achieve its stated aims and that economies in the Western world must adapt in response. It would involve a productivist "active state" taking a more active role in managing the free-market economy, boosting production and drawing up industrial policy, stronger supply chains, and more economic cooperation with international allies with similar economic goals. Reeves believes that the active state is part of an "emerging global consensus" led by Biden's administration which will replace the neoliberal economic consensus, and that economic policy must be driven by the need for security.

In an interview with the Financial Times in May 2023, Reeves said securonomics had to be based on "the rock of fiscal responsibility". She said her proposed £28 billion climate investment plan, Labour's version of the Inflation Reduction Act, had to "fit within her fiscal rules". In June 2023, the investment plan was revised to a gradual roll-out where the annual investment would rise gradually to £28 billion by around 2027. She argued that following the economic impact of the 2021–2023 global energy crisis, food price crisis and the Truss government's "mini-budget", the plan "will only be possible if we have an iron grip on public spending and tax receipts". The New Statesman reported that in an interview Reeves said "a Labour government would not introduce annual wealth and land taxes; raise income tax; equalise capital gains rates and income tax; rejoin the European single market and customs union; change the Bank of England's inflation target and reform its rigid mandate; or take private utilities into public ownership, except for the railways".

Tenure

Reeves appointed as Chancellor of the Exchequer by Keir Starmer, 5 July 2024
Reeves delivers her first speech, July 2024

Reeves was appointed Chancellor of the Exchequer by Prime Minister Keir Starmer on 5 July. She became the first woman to hold the office of Chancellor in its 708-year history. On taking office Reeves has said that since there is "not a huge amount of money" the focus will be on unlocking private-sector investment, as she believes "private-sector investment is the lifeblood of a successful economy." She made her first statement as Chancellor two days later, announcing measures to grow the economy. Reeves also announced her first budget would be released later in the year in the autumn.

It is such an honour to be here today as the Chancellor of the Exchequer. I know that responsibility that brings to guide our economy through uncertain times, to restore stability in an age of insecurity, to build prosperity that draws on the talents of working people. To every young woman and girl.... to every young woman and girl watching this: let today show that there should be no ceilings on your ambitions, your hopes or your dreams.

— Rachel Reeves' statement to HM Treasury, July 2024

In July 2024, Reeves announced a new £7.3bn National Wealth Fund to decarbonise Britain's heavy industry, which would be disbursed by the UK Infrastructure Bank over five years.

2024 Spending Review

On 29 July 2024, Reeves conducted a spending review, arguing there was a need to make "necessary and urgent decisions" because of an "unfunded" and "undisclosed" overspending of £21.9bn by the previous Conservative government. Among the decisions she made were to axe winter fuel payments for pensioners not receiving pension credit, about 10 million people, and which suffered a huge backlash; announcing the cancellation of several infrastructure projects; and selling surplus public sector buildings and land. Shadow Chancellor Jeremy Hunt dismissed her claims as "spurious", and argued that details of all government spending had been released by the Office for Budget Responsibility. During a subsequent appearance on Sky News, Reeves accused Hunt of "knowingly and deliberately" lying about the state of public services during the election campaign. In response, Hunt wrote to Cabinet secretary Simon Case, who heads the civil service, to dispute Labour's claims and request an "immediate answer" to "conflicting claims" that risk "bringing the civil service into disrepute".

In a bid to halt strike action, the government offered junior doctors in England a two-year pay deal worth 22% on average. Reeves scrapped the previous government's plan to sell shares to the general public in NatWest Group, but stated that the government still intended to fully dispose of its shareholding by 2025–26.

Alleged contravention of the ministerial code

The speaker of the House of Commons, Lindsay Hoyle, reprimanded Reeves in the Commons on 28 October 2024, saying he was "very, very disappointed" and found it totally unacceptable that she had given information to journalists in the US about the upcoming Budget, in contravention of the ministerial code. The code expects major government announcements to be made in the Commons before to the news media. Hoyle said the early revelations were a "supreme discourtesy to the House".

October 2024 budget

Main article: October 2024 United Kingdom budget
Reeves holding the red box

The October 2024 United Kingdom budget was presented to the House of Commons by Reeves on 30 October 2024. In the budget, she announced tax rises worth £40 billion, the biggest tax rise at a budget since 1993. Amongst the measures she announced were an increase in employers' National Insurance to 15% on salaries above £5,000 from April 2025, income tax thresholds to rise in-line with inflation after 2028, changes to farm inheritance tax meaning that the inheritance tax of 20% would effectively apply to rural estates above the value of £1,000,000 from April 2026, and a rise in the single bus fare cap to £3 from January 2025. The OBR forecast that the budget would mean the tax burden would be set to its highest ever level in recorded history. The director of the Institute for Fiscal Studies, Paul Johnson, accused Reeves of further undermining trust in politicians. Reeves later said that it was not a budget she would want to repeat, and accepted that the tax rises would likely hit wage growth for workers.

Rishi Sunak accused the government of deceit and breaking earlier fiscal pledges. He disputed Reeves' description of a "black hole" in the budget, stating that Labour had always planned to raise taxes, and condemned the previous Labour government's record.Ed Davey described the government’s plans on social care as “a good start” but inadequate. He also said that he thought that the budget may not offer British people "a sense of hope, urgency and the promise of a fair deal" and that more could have been done to help the more vulnerable people in society.

In a letter to Reeves, published on 19 November, a group of the UK's high street retailers, including Tesco and Greggs, warned the "cumulative burden" of tax rises announced in the budget, along with other policies already in the pipeline, would add billions in costs to the retail sector and put jobs at risk. Also on 19 November, several thousand people attended a protest in London over inheritance tax increases for farmers.

References

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  5. Wearmouth, Rachel (25 July 2022). "Why Keir Starmer has borrowed the Tories' "magic money tree" attack line". New Statesman. Retrieved 10 June 2023.
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