Has any Chancellor faced a challenge this daunting?

New Statesman​

11-06-2025

Photo by Aaron Favila - Pool/Getty Images
Only one thing matters. Is this the moment of turnaround; the return to growth after so long? If not, and Rachel Reeves has miscalculated, we are plunging towards a very dark economic near future and darker period in our politics.
In trying to look clearly ahead, the vast slew of numbers we got from the Chancellor today are almost no help at all. Borrowed multiple billions, to be spent over different periods running up to 2028 and not assessed by the Office of Budget Responsibility, are numb and obscure statistics for even experts to assess. What matters is how they are felt by ordinary voters, where, and when.
Commonsense is with the Chancellor. If capital investment in more secure energy sources, better transport links, more apprenticeships, and cutting edge tech technologies cannot bring the economic growth that has been so fugitive – well then, nothing can.
If day-to-day spending increases are not focussed mainly on health, in a country far too many of whose workers are off sick, and on education, in our country still undereducated, where else could growth come from? There Is No Alternative said an Iron Lady once.
Of course, they're always is. But the neo-liberal alternative, which is to cut back investment and public spending in order to slash taxes, hoping that the market springs up so exuberantly that we cut through to riotous success, while trickle-down keeps the poor just about content enough, has been tried for so long, and failed for so long, it feels more like a discarded pagan religion than modern economics.
Rachel Reeves is right. But that doesn't mean she will be successful or survive. This spending statement is about geography and timing as well as economics.
Listening to her statement purely for place names was instructive – the relentless references to Scotland and Wales, and in England to… well, I noticed Derby, Sheffield, Cumbria, the East Midlands, Yorkshire, Nottinghamshire, Humberside, Blackpool, Sheffield, and Swindon… made it sound as if the Treasury team had spent the past months on a blurred, relentless criss-crossing coach tour of non-Metropolitan Britain.
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As, in a sense, it had. Andy Haldane, the former chief economist at the Bank of England, and one time author of the levelling up policy, told me with great passion this week that Reeves had no chance whatever of getting economic growth without utter concentration on the north of England and the Midlands. And indeed, the big transport investment announcements, for Merseyside, Birmingham, Tyne and Wear, Northern
Powerhouse rail and (the sole Southern equivalent) the east-West rail boost around Milton Keynes to link Oxford and Cambridge, all come from the same thinking. as the Chancellor put it today, 'where are things are made and who makes them, matters.' This wa a strange fusion of her securoeconomics, and raw electoral calculation about where reform threatens Labour most. Adding the investments in AI, nuclear power and steel, and you begin to see the return of 'make it here' industrial policy.
But her timing problem may be harder to resolve than the geographical one. The big capital investments will take many years to be completed, noticed and to turn the political mood. The British public is not feeling noticeably patient. For many voters, relatively small scale promises such as the extension of the £3 bus cap outside London, the work on school uniform costs, improvements to dilapidated piers and seafronts, and the expanded warms home plan, will be more noticeable than multi- billion-pound announcements. The promise to empty hotels of asylum seekers may have a bigger political impact, succeed or fail, than Sizewell C or the AI strategy.
In this race for attention between short-term vulnerabilities and long-term strategy, conducted via a media so hostile, pessimistic and unforgiving, we cannot assume that the long-term will win. Those of us who believe that investment in infrastructure, essential services and training is the way forward, are still vulnerable to the short term shocks and insurgent politics of a demoralised country.
Mel Stride, the Shadow Chancellor, replied with a speech of exuberant pessimism, accusing Reeves of completely losing control of the economy and being certain to return in the autumn with higher taxis after a 'cruel summer of speculation'.
There is lots in the Tory analysis to take issue with – Labour have not invested in higher pay to buy off their 'trade union paymasters' but to bring essential help to public sector workers who have been ignored for far too long; it wasn't the 'Labour left' to blame for speculation about removing the two child cap, so much as the huge numbers of children thrown into destitution by the Tory austerity years.
But Stride was right about one thing, for sure: Britain remains incredibly vulnerable to even the smallest changes of sentiment in the bond market and the Chancellor has left herself almost no spare capacity to respond to the next political or economic shock without raising taxes. And, as the Growth Commission's Ewen Stewart pointed out in his response to the review, 'the UK economy remains one of the G20 laggards on almost any time horizon, be it one, three, five, ten or twenty years.' The challenge facing this government is immense.
It is no small part of the job of a modern British Chancellor to remain outwardly confident even in the toughest times. Reeves is turning out to be one of the toughest of tough cookies. It is in all our interests that she turns out to be shrewd as well.
[See also: Laughing at the Populist Right is not a strategy]
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