When the history of Keir Starmer’s premiership is written, the name of Rachel Reeves will be stamped through like a stick of Blackpool rock.
From cutting pensioners’ winter fuel allowance to the welfare rout, so many of the Prime Minister’s most difficult moments have originated in the Treasury.
Now, with John Healey’s principled resignation over defence spending, they threaten to bookend his time in office.
To be fair to Reeves, she was dealt one of the worst hands of any Chancellor. Public finances ravaged by Covid, the after-shock of the Liz Truss mini-budget and public services on their knees.
But it is possible to play a bad hand poorly.
Curbs to winter fuel payments may have been sensible, but the Treasury did nothing to prepare the public for a policy that is still thrown back in Labour MPs’ faces on the doorstep almost two years on.
The long wait for the Budget did little to lift the animal spirits of the economy either. When it came, Reeves rolled the dice, hiking taxes but leaving little “head room” for rainy days.
As the Spring Statement loomed, that swiftly evaporated, leaving the Treasury scrabbling around for ways to meet the fiscal rules. It was a briefing to the BBC that revealed the books would be balanced by cutting benefits which cast the die for welfare reform. Labour MPs were incensed.
Then the Treasury’s handling of the winter fuel U-turn poured petrol on that fire. It refused to explain where the cash would have to come from to reverse this policy, insisting that funding could only be allocated in a Budget.
As many in 10 Downing Street feared, this only emboldened the welfare rebels, who now believed that a magic money tree had been found. This contributed to the Welfare Bill rebellion last year, forcing No 10 to climbdown on its planned reforms, taking a sizeable chunk of the PM’s authority with it.
If winter fuel was the Government’s original sin, it was welfare that cast Keir Starmer into political purgatory. But the missteps did not end there.
Belatedly learning the lessons of winter fuel, the Treasury launched an extensive pitch-rolling exercise ahead of the Chancellor’s second Budget. No stop went unpulled. Off the record briefings. Public winks and nudges. Reeves even barged her way into the nation’s breakfast routine with an early morning press conference. It seemed clear from space that the Government was gearing up to break an election manifesto pledge not to raise income taxes.
But while the pitch was well and truly rolled, stumps were pulled before play got underway. There would be no manifesto breach, government sources revealed, just days before the Budget. That retreat is one of many that has led the Prime Minister to the dire position he now finds himself in.
The Chief of the Defence Staff has warned that we face the most dangerous moment since the end of the Cold War. The Prime Minister has put national security at the heart of his pitch to keep the top job.
In Spring, he told the Munich Security Conference he would “do whatever it takes to protect our people, our values, and our way of life”.
John Healey’s scathing verdict yesterday is that he has come up short: “You have been unable, and the Treasury has been unwilling, to commit the resources that the nation needs to defend this country at this time of rising threats.”
Allies of Reeves will point out that the Ministry of Defence signed up to the Spending Review just last summer. She is rightly concerned about what the bond markets would do to mortgages and government debt repayments if confronted with a fresh splurge.
As one Treasury insider said to me recently, “we have to worry about keeping a lid on spending because no other department does”.
And when money is tight the Chancellor is going to be ensnared in the administration’s most difficult problems. But the UK government spends around £1.3 trillion a year. As First Lord of the Treasury as well as Prime Minister, Keir Starmer should be able to find the money to resolve an issue he has staked his future on.
Instead of insisting that the money is found the PM has ended up siding with his Chancellor. That has ended up dealing yet another shattering blow to his authority.
Call it loyalty. Call it a blind spot. But the decision to once again defer to Reeves may be the Prime Minister’s costliest mistake.
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