Labour MPs concerned about the Government’s economic strategy have compared Rachel Reeves to Liz Truss “in slow motion” despite a show of support for the Chancellor.
Privately, some MPs are joking over Reeves’s future as Chancellor and comparing her to former PM Truss after market turbulence ramped up pressure on the Government’s tight spending plans.
But the majority of Labour figures rallied around Reeves on Tuesday as she defended her plans against a backdrop of economic uncertainty, sparked by rising borrowing costs and diminishing headroom.
The Chancellor was flanked by senior ministers in a show of support during her statement in the Commons, sitting alongside Deputy Prime Minister Angela Rayner, Business Secretary Jonathan Reynolds and Work and Pensions Secretary Liz Kendall.
Despite this intentional show of solidarity, some in the party are understood to be frustrated by her handling of the economic pressures.
One Labour MP told The i Paper: “Her nickname was Rachel from accounts. Now people are calling her ‘Rachel the temp’.”
Another said: “We are hoping things will calm down soon. At the moment it feels like Liz Truss in slow motion.”
Other MPs, however, backed the Chancellor in her role and dismissed suggestions she could be vulnerable as ridiculous.
Defending Reeves, one Labour MP said: “The international context of the bond markets is not really being taken in to account with a lot of the reporting around this. Some of the commentary [around Reeves being at risk] seems a bit like people have lost their heads.”
Another Labour politician said they still thought Reeves was the best person for the job, arguing the Chancellor had no option but to “find some money” for public services in the Budget by raising taxes.
They admitted, however, that they were “very worried” that Reeves might now have to introduce extra spending cuts because of the bond market turbulence. “I hope that doesn’t happen,” they said.
Experts point to global factors such as the impending arrival of Donald Trump in the White House and his potentially inflationary policies as the main driving force behind the soaring cost of borrowing.
Reeves’s decisions to change her fiscal rules to allow more borrowing for investment in infrastructure and place higher taxes on businesses have, however, also had an impact on the markets and hindered growth, businesses have warned.
The Chancellor also inherited what the Institute for Fiscal Studies previously described as a “decade and a half of historically poor growth” and left herself a thin £9.9bn head room in the Budget, which is now at risk of being wiped out by the high cost of borrowing.
Losing the headroom could force Reeves to raise more money through taxes or spending cuts.
Shadow Chancellor Mel Stride accused her of refusing to “face up to her own failures”, arguing the Government was “losing control of the economy”.
And she came under pressure from Labour MP and former shadow chancellor John McDonnell who warned against further spending cuts.
Defending Reeves, Labour Chair of the Treasury Select Committee Dame Meg Hillier told the Commons: “Listening to the shadow chancellor, you would think that the country was going to hell in a handcart.”
She said it was “no time for panic”, adding: “It is perfectly possible to manage any pressures on the Budget through astute management of public spending”.
“Compared with the years of austerity under the last side, we are a very, very long way from that approach,” she added, referring to the years of public spending cuts under Tory governments.
Speaking to BBC Radio 4’s Today programme, McDonnell said that imposing cuts to get out of the financial turmoil would be “politically suicidal” and undermine the support on which Labour got elected.
The former shadow chancellor, who had the whip withdrawn last year after voting to scrap the two-child benefit cap, also suggested the Government should “look to the Bank of England to intervene if necessary”.
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