She is not the first chancellor to cry in public, and may not be the last. But Rachel Reeves is the first whose tears have moved markets. No sooner had the realisation dawned that she was silently weeping – over a personal sorrow she won’t be pushed into revealing, she insisted later, not a political one – as she sat beside Keir Starmer at Wednesday’s prime minister’s questions, than the pound was dropping and the cost of borrowing rising. The bond traders who forced out Liz Truss’s hapless chancellor still clearly rate her judgment and want her to stay, even if (perhaps especially if) some Labour MPs don’t. Yet it is an extraordinary thing to live with the knowledge that a moment’s uncontrolled emotion can drive up the cost of a nation’s mortgages, just as a misjudged stroke of the budget pen can destroy lives.
The most striking thing about her tears, however, was Starmer’s failure to notice. Intent on the Tory benches opposite, the prime minister simply ploughed on, not realising that his closest political ally was dissolving beside him. Though within hours, a clearly mortified Starmer had thrown a metaphorical arm around her, and Reeves herself was back out talking up her beloved fiscal rules as if nothing had happened. But it’s the kind of image that sticks: her distress and his oblivion, an unfortunately convenient metaphor for all the times he has seemed oddly detached from his own government.
Quite aside from whatever private grief she is now carrying, Reeves has for years been shouldering an exhausting load. From the start, she and Morgan McSweeney, Starmer’s chief of staff, did an unusual amount of the heavy lifting on behalf of their oddly apolitical leader – and in government the stakes have only risen. McSweeney, a natural fixer now jammed faintly awkwardly into a strategist’s role, was once credited with near-mythical influence over Starmer, but for months is said to have been struggling at times to get the boss’s ear.
Reeves, meanwhile, has ended up by default running much of the domestic agenda, while Starmer focuses on foreign policy crises and a handful of big issues that passionately exercise him. Since even close aides and ministers complain of never really knowing what he wants, the result is a Treasury-brained government that tends to start with the numbers and work back to what’s possible, rather than setting a political goal and figuring out how to reach it.
Perhaps that makes sense to the City, but not to Labour MPs frogmarched through a series of politically toxic decisions with no obvious rationale except that the money’s got to come from somewhere. To many of them, Starmer appears at best like a kind of political weekend dad: largely absent from everyday life and reluctant to get involved in political battles, but swooping in at the last minute to issue orders. Complaints of Downing Street dysfunction have been a staple under at least the last four prime ministers, but there’s a weakness at the core of this No 10 that is putting the rest of government under undue strain, like a runner trying to push on through an injury who ends up pulling every other muscle in the process.
On the left, there is growing talk of trying to force a “reset” in spring, if next year’s Scottish and Welsh elections go as badly as they assume: force Reeves out, let radicalism in, fight Reform’s emotive rightwing fire with a form of leftwing populism perhaps loosely resembling what the Democrats’ Alexandria Ocasio-Cortez or the New York mayoral candidate Zohran Mamdani are doing in the US. It’s exactly what the markets fear, judging by their reaction to Reeves’ temporary wobble.
But even Labour MPs who’d never go that far are growing restless for change. Just raise taxes, cries this week’s New Statesman magazine, echoing a widespread view that the fiscal straitjacket imposed by Reeves is killing the government. I argued for the same thing in the Guardian back in March, and haven’t changed my mind. But the political cost of doing so is arguably higher now than it would have been then, when tax rises could plausibly still have been framed as an emergency response to Donald Trump pulling the plug on Europe’s defence and forcing Britain to rearm, rather than as an admission that the government can no longer get its spending plans past its own backbenchers.
In their understandable frustration, however, some fail to ask why Reeves holds the iron grip she does; why Treasury thinking isn’t more often challenged by No 10.
If this government’s mistakes often have her fingerprints somewhere on them, then so do many of its successes. Last week, I was at a housing conference, surrounded by people still euphoric at getting everything they asked for in last month’s spending review: unprecedented billions poured into genuinely affordable and social housing – with emphasis thankfully for once on the social – with a 10-year settlement from the Treasury, creating the long-term certainty they need to make it happen.
Angela Rayner fought like a tiger for it, but Reeves made the money happen, and the result will change lives. Children who would have grown up in grim, frightening temporary accommodation will have safe, permanent homes. Vulnerable people will escape the clutches of unscrupulous landlords and first-time buyers will climb ladders otherwise out of reach. It’s everything a Labour government exists to do, but as with so many unseen good things happening – on green energy, say, or transport – the money didn’t fall from the sky and won’t be there in future if an ageing and chronically unfit population carries on consuming welfare spending or health spending (the next big battleground, judging by the detail of Wes Streeting’s 10-year plan) at current rates.
To a frustrated Treasury, this week’s rebellion was evidence that Labour MPs don’t live in the real world, where hard choices must be faced for good things to happen. But, to the rebels, it’s evidence that the Treasury doesn’t live in their real world, where vulnerable people struggle with deep-rooted health problems only aggravated by being pushed into poverty, and the Greens as much as Reform are threatening to eat them for breakfast over it. There is some truth in both arguments. But that’s precisely why it is ultimately a prime minister’s job, and nobody else’s, to draw all the threads of the government together: to balance political yin against economic yang, such that neither dominates or bends the project out of shape.
Chancellors come and, eventually, even the best go. But sometimes it’s only then that you can really tell whether the problem was ever really the chancellor.