Rachel Reeves has been on a charm offensive with the City – but will it work for Labour?

As shadow chancellor Rachel Reeves tries to convince business leaders that Labour can “bring growth back to Britain”, she must be ready to detail her tax and spending plans fully to really sell Keir Starmer’s economic message writes Chris Blackhurst.

Shadow chancellor Rachel Reeves delivers a speech during a visit to Rolls-Royce in Derby (Stefan Rousseau/PA Wire)

Rishi Sunak had become increasingly frustrated as the economic outlook improved but he and his ministers received little credit.

It was this that made up his mind to go to the country. There seemed little point in waiting for things to get better (to quote the well-worn Labour song). They might, they might not.

He must hope that while voters did not show their appreciation in the recent local elections, they will do so in the Big One. While the Tories were punished in the council ballots, he could derive encouragement that Labour’s vote was soft: Tory defectors did not switch en masse to Keir Starmer’s party.

Sunak is aware, too, that a Tory voter backing Reform at district level is not the same as picking the person to govern Britain, to manage the Exchequer and run the army. That’s much more serious, and other parties fall by the wayside, marginalised by a traditional Tory versus Labour fight.

As the battle unfolds, Sunak hopes voters will once again put their faith in the Tories to manage their money.

He can claim to have brought inflation down. Where the economy is concerned he has a proven track record, albeit a very short one. Best to stick with him and play safe, or go with Labour and Starmer – still untested, for all his longevity as leader – and his shadow chancellor, Rachel Reeves?

For their part, Labour must put distance between themselves and the Tories if they are to succeed. But that requires alternative policies. Sunak has stuck rigidly to having barely any policies at all, not ones that involve spending or the spelling out of detail.

This is the challenge to Labour: come up with exact plans of your own and show how they can be funded.

Starmer and Reeves must convince voters they can be trusted with the national purse. Reeves aimed to do this in her first major campaign speech on Tuesday, explaining that she wants to lead the most “pro-growth Treasury in UK history”.

This is the time when all those cups of tea and coffee, all those hours spent wooing the City and its financial experts, come home to roost. If Labour receives a thumbs up from that quarter, Sunak will make little headway; but if it attracts criticism or ridicule, Labour’s lead can begin to slip.

This is where Sunak, too, is caught in a vice. The Tories won the last election because Boris Johnson seduced the post-industrial North and Midlands. He went into those Labour heartlands and sold them the idea that he understood their anger, he cared, and he was going to do something about it. He used the phrase “levelling up” and long-forgotten towns and cities were enthralled.

No politician had spoken to them in those terms before. Not even Tony Blair at his most positively gushing had dared to use such language. While that was to Johnson’s credit – for the first time in decades, these areas felt they were being listened to – there may have been another reason other leaders had not trodden this path: it was a pipe dream, and would cost far too much to even begin to implement. By comparison, the reunification of Germany cost $2 trillion.

Since taking the reins, Sunak has been lukewarm on Johnson’s flagship policy. But neither could he be seen to abandon it completely, so he’s made the occasional, half-hearted reference; it also explains his fudge over HS2, with the abandonment of the northern leg. Now Sunak is the voice of caution, determined to be seen to keep costs down. If he can get the economy motoring, he will be forgiven if he does not build a new road or rail link.

Which leaves Starmer and Reeves in an awkward place. They must say something that is persuasive and stands up to City scrutiny. Watch, as they are pushed into admitting that, yes, they might have to raise taxes to meet their ambition. Sunak, aided and abetted by the Tory media, will drive that argument home, constantly inviting his opponents to explain their position.

Starmer and Reeves will have resolved not to get drawn in, to rely on their intelligence and sense of responsibility. They need the City to speak up, they want more interventions such as the one made by former Bank of England governor, Mark Carney, at the last Labour conference. That blindsided the Tories: an ex-Bank chief effectively saying: “Vote Labour.” They were quick to rubbish him, to cite elements in his CV that suggested he was “a red” all along: Remainer, climate change activist. Still, it was impressive. Starmer and Reeves must produce more of the same.