Does Rachel Reeves have an escape route?

New Statesman​

21-05-2025

Photo by Hannah McKay -.
There's a phrase that Gordon Brown often liked to use in his Budgets. 'I have received representations,' he would declare, before imperiously dismissing whatever proposals his opponents had made.
Rachel Reeves – as is true of most occupants of No 11 – is receiving plenty of representations. After discovering the full extent of voter outrage over the winter fuel payment cuts, a large number of Labour MPs want a partial or full U-turn (a view increasingly shared in No 10).
More than 100 MPs, meanwhile, have signed a letter of protest to the chief whip over the health and disability benefit cuts – 83 rebels would be enough to eradicate the government's working majority of 165. Brown, who is guest-editing this week's New Statesman (look out for his editorial tonight), has made clear that the government should take action 'to prevent a rise in poverty' from the measures.
Then there is the cabinet. Angela Rayner has long been one of those privately critical of Reeves' fiscal approach – further spending cuts will hit unprotected departments such as her housing ministry – and, as today's Telegraph reveals, sent the Chancellor a memo back in mid-March proposing eight tax rises including removing inheritance tax relief on AIM shares and reinstating the pensions lifetime allowance.
Rayner's voice carries more weight than almost any other in Labour – she enjoys her own mandate as the party's elected deputy and is regarded by MPs as the frontrunner to one day succeed Keir Starmer. Though often cast as a tribune of the unions and the left, her political reach extends beyond this – she is close not just to Brown but to Tony Blair (appearing as the special guest at his Christmas drinks last year) and enjoy links across all the party's major factions, including the Old Right and Blue Labour.
Where does this leave Reeves? Until recently, the Chancellor appeared as immovable as Brown often did, refusing to give any ground to critics of the winter fuel cuts. But something has shifted. Insiders speak of 'soul-searching' at the Treasury in recent weeks. Reeves has declared that she is 'listening' – the word often deployed by politicians in advance of a U-turn. Focus groups studied by No 10 show that voters are three times more likely to think better than worse of the government if it changes course (not least as inflation hits 3.5 per cent).
For now, the Treasury insists that 'the policy stands'. But, as in the case of the agonised U-turn over the £28bn investment pledge, the line is only the line until it suddenly isn't.
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Action to mitigate the winter fuel cuts could come as soon as Reeves' Spending Review on 11 June – when Whitehall's winners and losers will become clear. If administrative hurdles can be overcome, the government could increase the £11,500 threshold at which pensioners lose their winter fuel payments (one option, proposed by ministers as long ago as last summer, would be to means-test the benefit in line with council tax bands).
Here is the view of one former Brown aide: 'The worst option is full reversal because then every unpopular measure is fair game. Second best is to introduce a higher threshold. Best is to come up with a new supplementary grant that compensates for the cut – such as a means-tested sustainable energy subsidy.'
After the ill-fated 75p increase in the state pension in 1999 – derided as miserly when the economy was the booming – Brown and Blair learned never to take on pensioners again ('your average Rottweiler on speed can be a lot more amiable than a pensioner wronged,' recalled the latter in his memoir A Journey). The winter fuel allowance, introduced by Brown in 1997, was protected throughout the New Labour years.
Though Reeves revered the former chancellor as a student – with a framed photograph of Brown in her Oxford University bedroom – she has instead found herself likened to George Osborne in recent months. That, unsurprisingly, is a comparison her team bridle at.
'George Osborne left our schools and hospitals crumbling and our infrastructure a mess,' one aide said. 'George Osborne wouldn't have closed the non-dom tax status, he wouldn't have raised VAT on private schools and he opposed our National Insurance increases. George Osborne is history.'
That was the conclusion that plenty of economists drew after Reeves' class-conscious first Budget – which raised taxes by £41.5bn, and spending by £70bn. Yet the Chancellor has found herself defined by a cut – the political cost of which some would deem incalculable.
At this week's Parliamentary Labour Party meeting, Starmer emphasised that he would fight Reform 'as Labour' – a rhetorical nod to MPs who accuse him of seeking to out-Farage Farage. The challenge facing Reeves is a comparable one – can she prove again that a Labour Chancellor runs the Treasury rather than the ghost of a Conservative one?
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
[See also: Inside the Conservative Party's existential spiral]
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