Analysis

Why Chancellor Rachel Reeves is under threat, and what she can do to stop it

Economic forecasts make for grim reading

The Chancellor has hit back at criticism of her handling of the economy after a turbulent few days for the pound and questions about her future.

Rachel Reeves faced questions in the Commons after a controversial trip to China, during which the cost of government borrowing increased and the value of the pound fell, putting her plans for the nation’s finances at risk.

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Chancellor of the Exchequer Rachel Reeves speaks to the media after a visit to Maidstone Hospital. Picture date: Tuesday December 10, 2024. PA Photo. See PA story POLITICS Spending. Photo credit should read: Dan Kitwood/PA WireChancellor of the Exchequer Rachel Reeves speaks to the media after a visit to Maidstone Hospital. Picture date: Tuesday December 10, 2024. PA Photo. See PA story POLITICS Spending. Photo credit should read: Dan Kitwood/PA Wire
Chancellor of the Exchequer Rachel Reeves speaks to the media after a visit to Maidstone Hospital. Picture date: Tuesday December 10, 2024. PA Photo. See PA story POLITICS Spending. Photo credit should read: Dan Kitwood/PA Wire

Ms Reeves told MPs the "economic headwinds" being faced by the UK meant the government had to go "further and faster in our plan to kickstart economic growth", in a clear suggestion the uncertainty was not created by the UK Government.

Here’s why there are rumours about the Chancellor’s future, the problems she’s facing, and possible ways to fix them.

The Prime Minister made a mess of his words

One of the biggest issues was caused by the Prime Minister, who twice refused to guarantee that Ms Reeves would still be Chancellor at the next election.

His spokesman later insisted that the Chancellor would be kept in post, but Sir Keir Starmer’s needless refusal to commit during a press conference created uncertainty, damaging Ms Reeves reputation, and providing a gift to the Tories. There is no risk of Ms Reeves being ousted, just a messy answer from the Prime Minister.

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Backed by business

Much of the criticism is over the lack of benefits from the Chancellor’s visit to China, with Tories arguing the £600 million for secure growth agreed is not enough in the circumstances.

However, Ms Reeves refuted this in the Commons, arguing there were other tangible benefits, especially for British companies with business in China. As well as this, she also cited HSBC, Standard Charter, and representatives of the London Stock Exchange as bodies who came on the trip, and recognised its value. These industries expressing confidence will make a huge difference to Ms Reeves prospects.

Former British Prime Minister Liz Truss continues to blame others for her mini-budgetFormer British Prime Minister Liz Truss continues to blame others for her mini-budget
Former British Prime Minister Liz Truss continues to blame others for her mini-budget | Getty Images

Grow her way out

The most important thing for the Chancellor is growth, representing a cornerstone of the Government's economic vision. However, forecasts are grim, with Treasury figures and Labour MPs concerned, not least with growth falling in both September and October.

A lack of growth means any headroom secured by the Budget will be eroded, meaning Ms Reeves will need to make further cuts, which will annoy both the public, her colleagues, and anyone reading economic forecasts.

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She is expected to give a speech on the issue later this month, where trade will also be mentioned. Ms Reeves is the first Chancellor to attend a meeting of EU finance ministers since the UK left the EU. That leading to something is vital.

Go a bit Liz Truss

Part of this plan for growth involves telling Britain's regulators that they must embrace risk and “strip back” overly cautious rules that are hindering economic growth. The Chancellor is expected to meet with the heads of the UK's biggest regulatory bodies this week, including the FCA and the CMA, and ask them to outline their plans for boosting growth in their respective sectors.

Point to the bigger picture

Government debt costs are also rising in Germany, France, Spain and Italy. With tariffs expected from US president-elect Donald Trump, interest rates will remain across the world. Ms Reeves will likely have plenty of international examples to argue the UK is not the only place where forecasts look bleak. Ms Reeves can also continue her other tactic - simply mentioning Liz Truss.

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