Rachel Reeves - Chancellor of the Exchequer : UK controversy

Introduction

Political Relationship and Party Affiliation

Rachel Reeves is indeed a Keir Starmer Labour Party member and has been a close political ally.

She joined the Labour Party at age 16 and has been the MP for Leeds West since 2010.

Reeves and Starmer present themselves as a “double act” and have moved “in lockstep” on economic policy. However, their relationship has faced strain recently.

Rapport with Starmer

While they have historically worked closely together, recent events suggest tension.

When Reeves appeared emotional in Parliament following welfare reform U-turns, Starmer initially hesitated to confirm she would remain Chancellor until the next election.

He later provided “full backing,” but observers noted this lukewarm initial response.

Some analysts suggest Starmer may be “distancing himself” from Reeves amid economic turmoil.

Impact on UK, EU, and US Relations

UK Impact: Reeves’ policies have created significant domestic challenges:

The UK budget deficit reached £151.9 billion in March 2025, the third-highest since records began

Public debt stands at 96.3% of GDP, levels not seen since the early 1960s

Economic growth forecasts have been repeatedly downgraded to 1% for 2025

EU Relations

Reeves has signaled a “wider reset” of post-Brexit relations, meeting with European finance ministers to negotiate closer ties.

She’s pursuing veterinary agreements and considering “dynamic alignment” with EU export regulations.

US Relations

She’s balancing EU engagement with US trade discussions.

She met with Treasury Secretary Scott Bessent about a potential trade deal while warning that Trump’s tariffs will have “profound impacts” even if the UK secures exemptions.

Effectiveness in Handling Budget Issues

Reeves’ effectiveness as Chancellor has been mixed at best

Negative Indicators

Her approval rating has plummeted to just 19% doing a good job, vs. 51% saying bad job

Her net approval (-32) approaches levels of Kwasi Kwarteng (-37) after his disastrous mini-budget

The OBR consistently forecasts that the government will miss fiscal targets without additional measures

Limited Positive Steps

Successfully passed central tax increases worth £40 billion in October 2024

Maintained fiscal discipline despite political pressure

Increased defense spending toward 2.5% of GDP target

Concrete Steps Taken to Fix Budget

Reeves has implemented several measures, though their effectiveness remains questionable:

Tax and Revenue Measures

£40 billion in tax rises, the largest since 1993

Crackdown on tax evasion projected to raise £1 billion annually

Suspended tariffs on 89 products for two years

Spending Controls

£5 billion in public spending cuts announced

£4.8 billion in welfare reforms and cuts

15% reduction in civil service costs, saving £2 billion by 2030

Investment Focus

£2 billion annually for growth-focused capital investment

£39 billion housing package over the next decade

£16.7 billion commitment to nuclear power including Sizewell C

Current Assessment

Has Reeves been helpful? The evidence suggests limited effectiveness:

Despite her efforts, the UK budget deficit continues growing, reaching £74.6 billion in March 2025

Economic growth remains anemic at 1%

Public confidence has collapsed, with 57% more concerned about the economy after her Spring Statement

The think tank NIESR warns she’ll need to raise taxes further or cut spending to meet her own fiscal rules

Key Challenges

Global economic headwinds and trade tensions limit policy effectiveness

Self-imposed fiscal rules create constraints that may require painful adjustments

Political rebellion within Labour over welfare cuts undermines her authority

Conclusion

Reeves has taken concrete steps to address budget issues, the results have been largely disappointing.

Her relationship with Starmer remains functional but strained, and her effectiveness as Chancellor is increasingly questioned both by markets and the public.

The combination of global economic challenges and domestic political constraints has limited her ability to deliver the economic growth and fiscal stability that Labour promised.