Reeves issues warning to successor as she battles to defend record
Rachel Reeves is set to issue a stern warning to her successor in Number 11 as she battles to defend her record after two years in office ahead of the overthrow of Labour’s election-winning leadership.
In what is widely expected to be her final act as Chancellor before Andy Burnham is made Prime Minister next week, Reeves will use her third Mansion House speech tonight to tell City chiefs that the next government must “maintain” fiscal credibility and stability.
“Because of the choices I have made, I’m proud to report that the British economy is strong,” Reeves is expected to say.
“This government has made huge strides in delivering on the promise of change.
“That change is only possible if we maintain the credibility that we have earned, and the stability that we have built.”
Reeves had signalled her hope to cling on to her position as chancellor following the resignation of Keir Starmer, telling top City leaders last month she had “unfinished business in fiscal devolution” in a nod to Burnham’s plans to give greater powers to regional governments.
But those hopes quickly faded as the incoming Burnham team refused to rule out a shake-up at the Treasury, with energy secretary Ed Miliband viewed within the party as her most likely successor. Miliband is reportedly poised to approve fresh gas exploration licences in the North Sea, overturning months of staunch opposition to the projects, in the clearest sign yet the former party leader is vying for the job.
In a bid to soothe investors’ nerves, Burnham has pledged to retain Reeves’ fiscal rules, which include a pledge that spending will be matched by revenues by 2030.
Reeves’ rocky relations with big business
Reeves’ valedictory message marks the culmination of a turbulent relationship with the business community over the past two years.
The Chancellor was credited with restoring the City’s trust in the Labour party’s handling of the public finances after a series of “smoked salmon offensive” meetings with senior figures in the run-up to the 2024 general election.
But faith in Labour unravelled after businesses were hammered by sharp tax rises at successive budgets alongside minimum wage rises and a tightening of employment rules.
In its quarterly economic survey last week, the British Chambers of Commerce said the number of firms planning to increase investment over the next 12 months had fallen to a post-pandemic low. Over half cited taxation as a key concern.
“We are being taxed out of existence,” one business owner said.
But in Reeves’ set-piece City speech tonight she is expected to praise financial services as “the crown jewel in the UK economy and a shining example of our potential as a nation,” alongside laying out a path toward loosening bank capital rules.
She will be joined by Dame Susan Langley, Lady Mayor of Canada, who will unveil plans for a new AI platform to accelerate investment into British infrastructure projects.