Why are some comparing Rachel Reeves’s trip to China to Denis Healey in 1976?

The chancellor is out of the country just as the pound sinks and borrowing costs soar – but history tells us this is no time to ditch ‘Rachel from Accounts’, says Sean O’Grady

After six months – and making due account for the woeful inheritance and inevitably inflated public expectations at the election – it’s fair to say that, in the words of Keir Starmer himself, there have been some choppy waters for the first Labour government since 2010.

Starmer is the man in charge, and he must take ultimate responsibility for where he finds himself in the opinion polls. Yet it’s striking as to just how many of the missteps since the general election have been those taken by the chancellor, Rachel Reeves, easily Starmer’s closest colleague.

The panicky cancellation of the winter fuel allowance, the most hated single Labour policy, never even remotely hinted at in the election, was hers. Even Starmer reportedly regrets it as a “mistake”. The downbeat rhetoric about the prospects of the economy that has helped shred consumer and business confidence? The chancellor again, with Starmer adding his own monotonal baritone in chorus.

Bumper pay rises for the doctors and the rail drivers? Signed off by Reeves to stop the incessant strikes but with no productivity strings attached; the unions have been merely emboldened by this unfortunate precedent.

The “tractor tax” that raises so little money for such huge social and political cost? Again, all down to Rachel, who didn’t even consult Steve Reed, the hapless environment secretary. Pushing bus fares from £2 up to £3 – which sounds trivial but the move is disproportionately hated? Another Reeves decision taken without due care and attention to the electorate’s sensitivities.

And now, her very own “iron-clad” fiscal rules are in jeopardy because the decisions she took in the Budget haven’t stood the test of even this short passage of time.

So far from reassuring the markets, the October Budget merely confirmed that the public finances aren’t quite on a sustainable footing yet, and certainly not sturdy enough to survive a Trump presidency – tariffs, inflating the US budget deficit and trade wars with China and the EU. Hence the market turbulence, the pound sliding and interest rates edging higher.

It’s not so much that Reeves’s policies are wrong – like any chancellor in a tight corner, she has few good options – but that her presentation has been so flat-footed. She’s just not a very good salesperson. Or politician, as we sometimes call such people.

In personnel terms, she is the greatest disappointment in the government, much more so than, say, Louise Haigh, who had to quit the cabinet before anyone noticed who she was. Whereas we all knew what we were getting with the lawyerly, conscientious, charisma-lite Starmer, hopes were much higher for Reeves, who famously burnished her CV as a top economist and archetypal technocrat, the first female chancellor and a sort of Keynes for our age.

Instead, she’s become known as “Rachel from Accounts” which, like all such cruel jibes, has a little too much truth for comfort. It’s difficult to see what makes her that much better than Jeremy Hunt.

So there are grumblings about her on the Labour backbenches, and the opposition is calling on her to cancel her trade mission to China.

There are even unkind comparisons with Denis Healey, the besieged Labour chancellor in the 1970s. Poor old Denis was on his way to an IMF summit in sunny Bangkok when he was told, as he was about to board the plane at Heathrow, to come back and save sterling. That was in October 1976, a low point for the government and the nation, and it was he who had to shoulder the humiliation of seeking a bailout loan from the IMF, an experience from which the Callaghan government never really recovered.

All that said – deep breath… – this is not the moment to ditch Reeves, or even for her to stay in London at the moment. Put at its simplest, post-Brexit, we need friends wherever we can find them, and that includes Chinese money. If she and her delegation can start to warm the economic relationship with China, without entirely selling out on human rights, then it’ll be air miles well spent. Cancelling the trip would look all kinds of weak.

She should stay in post, and Healey shows us why. He had to face an even worse inheritance after the collapse of the Heath government in 1974, and he, the most robust of politicians, soldiered on for more than five years as chancellor of the Exchequer. The reasons for his survival are similar to why Reeves will have to carry on.

First, there is no obvious alternative to Reeves in the cabinet, aside from Wes Streeting, who has a job of work to do at health. Second, demoting her after such a short period would damage confidence in the government more than keeping her on. Third, merely replacing her wouldn’t in itself raise another penny in tax or accelerate economic growth by a single pound.

Rachel Reeves, in other words, is as good as it gets, and it’s her presentational mess to clear up. She will have to do so in two phases this year – the comprehensive spending review in the spring; and her second Budget in the autumn. Like Denis Healey, she’s going to have to take an awful lot of punishment, including from the Labour left, and she will need to give as good as she gets.

She’ll also need the support of Starmer, which looks assured. The key relationship in any government is that between prime minister and chancellor, and that’s another reason she is secure in her post. It’s just a pity neither of them seem able to stitch together a convincing “narrative”, or even seem that bothered about trying.

Unfortunately for Denis, the public spending cuts he and prime minister Jim Callaghan – an equally solid partnership – had to force on a reluctant cabinet and Labour Party scuppered any chance he had of becoming leader of the party. Nor did they help Labour in the polls, and did nothing to save the party in the following general election. Just in case Rachel is still harbouring any ambitions in that direction...