In the run-up to her crunch autumn budget, Rachel Reeves will seek to recruit a heavyweight economic adviser after the role of John Van Reenen is reduced.
Van Reenen, a well-respected professor from the London School of Economics (LSE) and an expert in productivity, has been chief economic adviser to the chancellor since Labour came to power.
His role will be cut from three days to one a week as he returns to the LSE at the start of the academic year. Anna Valero, another member of Reeves’s council of economic advisers, will also depart.
Treasury sources said that while Van Reenen’s position was in theory part-time, his position at the chancellor’s side through a tumultuous 12 months had meant working “seven days a week”.
Reeves is under intense pressure to respond to a deteriorating economic outlook with a fresh round of tax rises in her autumn budget.
The chancellor has had a bruising few months after being forced to reverse her decision to remove the winter fuel allowance from most pensioners and take much of the blame from Labour’s backbenchers for the botched £5bn in cuts to disability benefits.
At a House of Lords committee on Tuesday, the chancellor placed Van Reenen’s key insight – the need for higher investment to boost the UK’s productivity – at the heart of her economic strategy.
The chancellor told peers: “The key problem is productivity and investment is the answer. Investment in human capital, investment in physical capital and also investment in new technologies. That’s why the fiscal rules I set out do treat investment differently.”
She declined to rule out taxing wealth more heavily, telling Lord Lamont, a former Conservative chancellor in the 1990s: “This is, with respect, what you would have done and did do in my position: you rightly said that tax is a matter for a budget and we’ll set out our policy then.”
Treasury sources said Valero, also an LSE fellow, had always been expected to return to academia but would remain in touch with government, adding that Valero and Van Reenen had worked on key policy announcements, including the industrial strategy and the spending review, which had now been completed.
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A Treasury spokesperson said: “John and Anna have provided invaluable leadership to the chancellor and will continue to do so in their new capacities.”
Whitehall insiders said as lead adviser on industrial strategy, Valero’s departure risked leaving the policy without a powerful champion in the Treasury, which could make it tougher for departments tasked with grabbing the chancellor’s ear to ensure the policy was implemented effectively.
Meanwhile, some Labour veterans have long warned that Reeves lacks a powerful enforcer who can impose the Treasury’s will across Whitehall, pointing to the role played by Ed Balls when Gordon Brown was chancellor, and to that of Rupert Harrison, George Osborne’s chief economic adviser.
Van Reenen’s departure comes as Keir Starmer is beefing up his own economic expertise. For some time No 10 has wanted to recruit an economic adviser to provide a counterweight to Treasury dominance in economic policymaking.