Rachel Reeves' mortgage gamble is the move of a chancellor who is running out of options
The analysis she is working from is that the financial crash of 2008 – which saw several banks go under or need to be nationalised – has made the country too risk-adverse.
But the biggest risk taker may well be the chancellor herself, with her plans to free up the mortgage market and slash red tape for financial services in the City.
Like many gamblers, though, Ms Reeves' spin of the financial services roulette wheel, to be announced in her Mansion House speech this evening, is largely prompted by the fact that she is running out of options.
After all, when Labour won the election just over a year ago, Ms Reeves came into office with economic growth as her 'number one mission'.
For all of the talk of 'having the best economic growth in the G7', it has actually been negligible and, in fact, in the last quarter it has gone slightly backwards.
She also insisted she did not want to raise tax, and even said during the election that she would prefer to cut tax. Once in power, however, she oversaw a massive increase in spending fuelled by £40bn of tax rises in her first Budget, mostly a hike on employer contributions to national insurance which is now impacting the jobs market.
Attempts to bring spending under control by tackling welfare has ended with U-turns on winter fuel payment cuts for pensioners, costing her £1.25bn, and planned welfare cuts mostly on disability benefits which has cost her a further £5bn.
The frustrations and pressure on Ms Reeves could not have been better illustrated than the tears visibly rolling down her face during a recent session of PMQs, where the prime minister Keir Starmer could not even guarantee her future as chancellor.
The one break she got was after that unfortunate incident, Sir Keir was forced to give her a belated vote of confidence to prevent the markets tanking at the thought she might be sacked.
But now, faced with the prospect she will have to bring in yet more painful, growth-killing taxes – possibly so-called wealth taxes on pension funds or dividends, or stealth taxes by freezing income tax thresholds, or both – Ms Reeves only has one way to find growth.
That is to return to the pre-2008 model on financial services and mortgages to encourage investors and first-time buyers to start taking risks again themselves.
It is exactly what fed the high growth which characterised the last Labour government under Tony Blair. Most of the country's economic success was floated on the 'get rich' model of the City.
The problem is that the result of that model was 2008 when the deregulated financial services industry took several risks too many, and the blogabl economy was plunged into crisis, taking whole banks with it.
Part of the reason for that was because of the mortgage market, where it had become far too easy for people to borrow unsustainable amounts that they could not pay back in so-called sub-prime mortgages.
Ms Reeves is nodding back in that direction. By reducing the minimum wage for people to have a mortgage and increasing the ration from 3.5 times salary to 4.5 times she is not quite repeating the mistakes of the 2000s where people could literally self-certify their income.
However, she is heading slowly in that direction and it brings an enormous risk, as well as potential for short-term economic growth.
Possibly the greater worry for Ms Reeves, though, is if this does not work and her bonfire of red tape does not produce the increase to the nation's wealth that she needs to help fund the bill for public spending increases before the next election.
There may not be any more dice for Ms Reeves to throw if that is the case. And, despite his recent assurances, that could mean that the prime minister ends up looking for someone else to do the job.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
27 minutes ago
- The Independent
The inside story of how Starmer seized back control of Labour - but with a risk
On Wednesday afternoon, York Central MP Rachael Maskell like most MPs was winding down, getting ready for a long summer recess to recharge, take stock and come back refreshed. Many of her colleagues were hitting the summer drinks circuit in Westminster with dreams of the various beaches in different corners of the Mediterranean they will be heading to in the very near future. But Ms Maskell got a call out of the blue asking her to go and see the Labour chief whip Sir Alan Campbell immediately. Starmer strikes back She was to discover that the prime minister - after discussion with his closest allies - had decided to strike. The talk of deputy prime minister Angela Rayner or possibly health secretary Wes Streeting replacing him had got too much. And it was clear after the welfare rebellion - which Ms Maskell had reluctantly in the end led - that he had lost control and needed to restore it. The plan to make examples of a few troublemakers was, it is claimed by one source, 'cooked up at Chequers' between him, Sir Alan and chief of staff Morgan McSweeney when senior ministers, key staff and others were called in to have a much needed reset. It was perhaps also a message to the MPs - if one was needed - that their demands for McSweeney to be sacked would not be heeded and he still wields influence over this government. The meeting with the chief whip on Wednesday afternoon was short with Ms Maskell discovering that she and three other colleagues - Neil Duncan-Jordan, Brian Leishman and Chris Hinchliff - had been suspended from the parliamentary Labour Party. Three others lost their trade envoy roles. 'I was very shocked,' Ms Maskell admitted to The Independent. 'I had no warning at all. I had no idea that this was coming, and I think that doesn't make for good party management, they should have engaged. There was no pre-warning.' The York Central MP had ended up being one of the leading welfare reform rebels, proposing a reasoned amendment on the day when Sir Keir had been forced to make a humiliating second U-turn and essentially cancel £5bn of disability benefit savings to avoid defeat. An interesting briefing went out that the four had been chosen for "persistent k*** headery' - put in normal English it meant they were serial rebels. Normally suspensions of the whip for rebels take place in the immediate aftermath of a vote - and there were 49 Labour MPs who voted against their government, 45 of whom have not been suspended. A rebellion 'by the book' Ms Maskell admitted to being stunned by the whole surprise strike. During her opposition to the welfare reform she thought she had played it by the book. 'I reached out to Number 10, I wrote to Keir Starmer a couple of times, I engaged with ministers, I wrote to the chief whip. There was never any indication that there would be any ramifications for this.' And she still has not had an explanation as to why she and the other three were singled out. 'Obviously my name was on the reasoned amendment, but it was the exact same reasoned amendment as the one by Dame Meg Hillier (which had been withdrawn after an initial U-turn). I think we're curious as to why the four of us have been identified in this situation.' Champagne for Starmer's allies The evening after the news broke the Labour Together thinktank, which McSweeney had used as the vehicle to destroy Jeremy Corbyn, held its summer drinks with a raft of loyalist MPs and ministers. As the champagne flowed and glasses clinked, Mr Streeting gave the main 'rah! rah!' speech with an uncoincidental message that it was Starmer and McSweeney 'who won us the election', just in case people needed reminding. In that particular reception Streeting was mostly preaching to the converted but it was less true in other summer drinks gatherings. A number of sympathetic rebels had gone over the night before the suspensions to the Diageo drinks in the garden connected to Westminster Abbey where they rubbed shoulders with loyalists, Tories, Lib Dems and the odd SNP MP. There several Labour MPs had sung the praises of Ms Maskell for her leadership in the rebellion with one more centrist rather than lefty rebel noting: 'I didn't come into politics to cut money for the disabled.' 'Good for Rachael for not backing down,' said another. The shock the next day when the axe fell on the four rebels was palpable. 'The fact he has to do this is a sign of weakness,' one critic noted. 'Absolutely shameful to target Rachael,' said another. Targeting four 'loners' Nobody could work out why those four had been chosen with the exception of Neil Duncan-Jordan who had been expected to quit the party anyway. Starmer had a discussion with his chief whip and Mr McSweeney over a concern 'he was losing control of the party.' 'He needed heads on spikes, he needed to reassert authority,' noted one ally. They went through the list of the 49 who had rebelled knowing that they could not suspend them all but wanted to pull out a few for special treatment. But why those four? The suspension of Ms Maskell in particular really grated with many of her colleagues, even ones who did not agree with her on welfare. The abiding theory though is that the four were 'loners', as one Labour MP put it. 'They are people without a real base.' An article of faith In particular, Ms Maskell's Christianity appears to have been a factor in her being picked out. There are a number who wonder if Starmer 'has a Christianity problem'. She cuts a lonely figure on the Labour benches opposing abortion and in a minority on ethical issues such as assisted dying, but beyond those conscience debates she has always made it clear that her faith shapes her politics not the other way round. Ms Maskell quoted to The Independent one of Jesus Christ's famous parables of God dividing the sheep and the goats between those who 'helped the hungry and thirsty and those who needed clothing' who went to paradise and those who did not who went to Hell. For Ms Maskell that was a guiding principle in the consideration of benefits for the disabled. 'I don't think the whips can determine what your conscience is,' she added. But she noted: 'I don't think it's well understood about those kind of deep motivations of faith. It's about public service for people out there, but actually being that voice in Parliament is important, and it's important, I think, at a time where our country is in such a state to be able to try and discern that responsibility.' It is not with a little irony that Starmer had decided his own version of the sheep and goats casting the four rebels into parliamentary outer darkness. Joining the Corbyn Party But with Jeremy Corbyn and Zarah Sultana setting up a party there was a feeling that some Labour MPs may be tempted to join, especially if they are ousted. There were more prominent names on the left who could have just as easily been suspended 'who would have walked straight into a Corbyn party', one MP noted. Ms Maskell said she would not 'but others might do.' 'You cannot find anybody more Labour than me,' she insisted, adding that she would 'not change' to be allowed back into the fold again. Another senior figure put it more bluntly: 'I think Starmer is finished. But if he keeps throwing people out to save himself, then Jeremy [Corbyn] is going to have more friends joining him.' But even allies are uncertain. At those Labour Together drinks, one figure on the right of the party said: 'I think it was a mistake. He should have suspended the whip immediately. All he he has succeeded in doing is reminding people of what happened just as it moved off the agenda. Now it will linger in people's minds over the summer.'
The Sun
27 minutes ago
- The Sun
Taliban ‘already murdering Afghans linked to foreign military' days after chilling warning over MoD ‘kill list' leak
THE TALIBAN are reportedly already murdering Afghans linked to foreign militaries - days after a huge MoD data leak. Fears have been growing over the safety of more than 18,000 Afghans whose details were included on the secret list. 3 3 3 A number of named individuals have been assassinated since the leak with one man shot four times in the chest at close range on Monday one of three assassinations in the past week according to the Mail. It comes after the Taliban sent a chilling warning that it will hunt down thousands of Afghan refugees on a "kill list" after the UK's huge data breach. Details of almost 20,000 refugees fleeing the Taliban were leaked after a Royal Marine mistakenly sent a top secret email to the wrong people. Since then panic has been spreading as up to 100,000 could face deadly repercussions from ruthless Taliban rulers who hunt down and kill anyone who helped the UK forces. But sources have insisted it was impossible to prove conclusively whether it was a direct result of the data breach. Afghans were informed on Tuesday that their personal details had been lost including names, phone numbers and their family's details as well as other details that could help the Taliban hunt them down. It is not yet known whether the Taliban is in possession of the database. It includes names of Afghans as well as the names of their individual UK sponsors including SAS and MI6 spies and at least one Royal Marine Major General. One Afghan soldier who fled to Britain in fear of retribution, believes his brother was shot in the street this week because the Taliban believed he was affiliated to the UK. "If or when the Taliban have this list, then killings will increase – and it will be Britain's fault," he said. "There will be many more executions like the one on Monday." He is convinced his sibling was executed because of his own association with Afghan special forces, known as the Triples. He believes that the Taliban sought revenge on his family instead as news of his brother's murder reached him in Britain within an hour of the execution. A day later, Taliban fighters dragged a woman from her home and beat her in the street. A former British military interpreter who witnessed the attack claimed it was because the woman's husband "worked for the West" and is now hiding in Iran. Taliban officials have claimed the details of all the refugees have been known to them since 2022, after they allegedly sourced the information from the internet. A dossier listing more than 300 murders includes those who worked with the UK and some who had applied for the UK's Afghan Relocations and Assistance Policy (ARAP) scheme. This includes senior Afghan intelligence officer, Colonel Shafiq Ahmad Khan, a 61-year-old grandfather who had worked alongside British forces. He was shot in the heart on his doorstep in May 2022. There has been fury this week over the data breach's deadly implications with one angry former interpreter saying: "We risked our lives for the UK standing beside them day after day, now they are risking our lives again." The epic MoD blunder was kept Top Secret for almost three years by a legal super injunction. And the government is still battling the courts to keep details behind the Afghan data leak secret. Thousands of the refugees had to be secretly relocated to the UK and it is set to cost Britain up to £7 billion. A total of 18,714 Afghans were included on the secret list, many of whom arrived via unmarked planes which landed at Stansted airport. Many of the Afghans who were flown into the country as part of Operation Rubific were initially housed at MoD homes or hotels until permanent accommodation was found. Only around 10 to 15 per cent of the individuals on the list would have qualified for relocation under the emergency Afghan Relocation and Assistance Programme, known as ARAP, opened as Kabul fell to the Taliban. But the leak means many more now have a valid claim for assistance and relocation.
The Sun
27 minutes ago
- The Sun
DWP to make big changes to means-tested benefits including Universal Credit within DAYS
HOUSEHOLDS should be aware of a big change to means-tested benefits which is due to come into force in days. Payments received through the miscarriage of justice compensation scheme will no longer count as income when determining eligibility for support such as Housing Benefit and Universal Credit. 1 The government-funded programme gives payouts to those who have been wrongly convicted of a crime or had their conviction overturned. Under current rules, people who receive this reward may not be able to claim means-tested benefits as it can push their income above the eligibility threshold. But come Tuesday July 22, the Department for Work and Pensions (DWP) said it is no longer counting this compensation as capital when calculating these types of benefits. The new rules apply across Great Britain and Northern Ireland. It means individuals who have been awarded compensation for a miscarriage of justice will not have this payment included when assessing their eligibility for means-tested support. And if you previously could not claim the support because of the compensation payout, you could reapply. The DWP said: "Any compensation payments you received will not be taken into account as capital when calculating entitlement to these benefits. "You will need to provide a copy of your compensation award as part of the application process." If you are already claiming means-tested benefits but have received a payment, you should also report this as a change of circumstance. The department will be able to consider your benefits to ensure you are receiving the correct amount. Cost of Living payment updates — Thousands have just days to claim free £300 DWP cash You can report a change in your circumstances by visiting What are means-tested benefits? Means-tested benefits are awarded based on a person's financial situation. The types of means-tested benefits include: Pension Credit Universal Credit Housing Benefit income-based Jobseeker's Allowance income-related Employment and Support Allowance Income Support The support is only available to those who can prove that their income is under a certain amount. Plus, exactly how much you are entitled to can vary from person to person. For example, every £1 you earn from working, your Universal Credit payment goes down by 55p. Meanwhile, the maximum amount of savings you can have to qualify for Universal Credit is £16,000. Therefore, if you receive a sum of money that takes you over this threshold, you are likely to see your benefits stopped completely. If you have £6,000 or less in your bank account, this will not affect your Universal Credit claim. To qualify for Pension Credit, you must have less than £10,000 in savings.
