Has Chancellor Rachel Reeves been replaced by a hologram?
Chancellor Rachel Reeves appears to running UK finances, but she isn’t (Image: Getty)
That was one of several ridiculous thoughts that crossed my mind as I listened to yesterday’s dreary speech about investing in new trams.
Or rather, tried to listen. It was one of the worst political speeches I’ve ever heard (and that’s saying something). Flat, joyless, robotic.
Hence the hologram. It would explain a lot.
I only perked up during the Q&A at the end, when she promised not to break Labour’s manifesto pledge by hiking income tax, National Insurance or VAT.
That genuinely surprised me.
A heap of economists – real ones – say she’ll have to raise at least one of them in a £30billion Budget tax raid. But apparently not. According to her.
So what will she do?
As far as I can see, she has three options: hike taxes, cut spending, or scrap her fiscal rules. All of them are looking unlikely today.
She’s ruled out the tax hikes twice – both yesterday and last November. So unless she’s telling porkies (here’s a list of her previous ones), that door is shut.
Cutting spending? Also unlikely.
Acting tough by axing the winter fuel payment has rebounded badly.
So has her plan to cut £3.5billion off the UK’s soaring sickness benefits bill.
Labour activists are up in arms. Starmer is backtracking like mad. He’s not going to let her cut anything else this autumn.
Instead, he’ll make her spend more, by scrapping the two-child benefit cap. Reeves has even lost the fight to curb Ed Miliband’s net zero splurge.
With Donald Trump‘s tariffs adding to the disarray, her £9.9billion fiscal headroom is long gone unless she does something.
That leaves only her fiscal rules.
The rule first is that day-to-day spending must be covered by tax revenues, with borrowing for investment only. The second is that net debt must fall as a share of GDP.
She could bin those but there’s another problem. Reeves has called them “non-negotiable”.
She’s also described them as “iron-clad” and “enshrined in law”. Axing them will be the mother of all U-turns.
As far as I can see, Reeves has boxed herself in.
No tax hikes, no spending cuts, no rule changes. And no way to balance the books.
Something has to give.
If she breaks her own iron-clad rules, she may never recover from the ridicule. If she tries to slash the benefits bill, the left will finish her off.
And she’s publicly ruled out tax hikes. Or at least, her hologram did.
She’s boxed herself into a corner. Keir Starmer, Angela Rayner and even Ed Miliband are calling the shots.
Reeves is Chancellor in name only. A virtual Chancellor, rather than a real one. At some point, Starmer will replace her. But for now, we’re stuck with that hologram.
