Can Rachel Reeves survive questions over her expenses and CV?

If the PM were to sack the chancellor, it would look just as bad for him as it would for her, writes Sean O’Grady. After all, none of her policies would have made the final cut without his approval

How much easier would Keir Starmer’s life be if his chancellor, Rachel Reeves, decided that the various allegations flying around about her CV and past behaviour at a bank were “too much of a distraction” from the important work of the government?

More important even than that, how much of a boost would it give to the government’s popularity? And, lest we forget, would it be in the national interest, quaint as such a question may be?

The answer is that replacing Reeves would generate some sensationalist headlines, keep the lobby journalists occupied for a few days – and make virtually no difference to anything.

If Reeves has made mistakes – and the policy choices she has made have been questionable – then they were not hers alone. They were agreed by the prime minister, and indeed the whole cabinet – and dissent within the Labour Party was muted.

With hindsight, it’s been reported, Starmer thinks the most hated of them all – means-testing the pensioners’ fuel allowance – was “a mistake”. And maybe even Reeves would agree. The so-called “tractor tax” on farms has suffered from a complete lack of consultation, but again, it was agreed – and is still defended – by the prime minister.

The hike in employers’ national insurance contributions (NICs) threatens to push Britain into recession, but no one – either inside or outside Labour – has suggested a better way to raise £25bn. The pay rises of doctors and train drivers were probably inevitable, unless the government wanted the nation to carry on struggling through incessant strike action.

Reeves, in other words, has been carrying out the policy of the government. Given its manifesto commitments and the political constraints it has created for itself, if Reeves went, then the policy would remain unchanged. To borrow a phrase, there is no alternative to fixing the public finances as a necessary condition for longer-term growth and stability, even if it means a painful slowdown now.

It is true that Reeves lacks a certain political touch, is an indifferent speaker, presents a robotic persona on the media and is a poor salesperson for her policies. It’s obvious that health secretary Wes Streeting would do the job better, in presentational terms, but the government cannot immediately reverse all the tax measures taken since it came to power, even if it wanted to. The result would be chaos on the markets, and these have been jittery enough in recent times.

When a chancellor resigns, it damages the prime minister, because it always looks as though they are carrying the can for doing what their boss wanted. That is unfair, and it’s invariably the case.

Indeed, some chancellors get sacked even though they privately disagreed with their prime minister’s policy. The saddest, most spectacular and quite recent example of this was poor old Kwasi Kwarteng. A victim, to some extent, of his own arrogance, it seems he urged Liz Truss not to go so far and so fast in her notorious 2022 “mini-Budget”. She told him she was in a hurry, and when it all went wrong, she jettisoned him in a futile attempt to save her premiership. Replacing him with Jeremy Hunt calmed the financial markets, but left her looking looking even more pointless.

Truss was a rare example of such justice. When John Major’s policy of pegging the value of the pound to European currencies collapsed in 1993, he effectively fired his friend and chancellor Norman Lamont (a cabinet demotion was offered and refused). Lamont became an embittered critic, and it was never a glad confident morning for Major again – but he survived. Much the same goes for when James Callaghan took the blame for devaluation in 1967. Prime ministers do not emerge unscathed from such traumas.

Obviously these fresh questions about Reeves’s personal behaviour in the past – some dating back 20 years – cannot be blamed on Starmer, which makes this a different kind of case, and one in which the PM would suffer less collateral damage if she were removed.

Yet she (and he) would not be in such difficulties now if the economy were booming and the public services were operating as everyone wishes they would. Even fewer people would care about why Reeves left her job at Halifax in 2006, or her habit of exaggerating her economic expertise (ironically irrelevant to her job anyway).

The fact is that dropping Reeves would make minimal difference to the government’s economic policy, Labour’s poll ratings, or the UK’s trend growth rate. In fact, it might even make matters worse.

Reeves’s whole shtick is to be the “iron chancellor”: impervious to criticism and appeals to change policy, whether they be from angry farmers, disappointed pensioners or her own backbenchers. She is there to do the dirty work, take the punishment and abuse, and just keep going regardless.

It is supposed to impress the markets and prove that a Labour government is able to manage to take the gruesome decisions that are necessary when you’re running the public finances. She might once have been cavalier with the company credit card, indulging colleagues with nice presents using other people’s money, but she’s certainly not going to do that with His Majesty’s Treasury. Quite the opposite.

She’s not a great politician, or a distinguished economist, for whatever that’s worth – but she is all they’ve got at the moment, and it is far too early to sacrifice her. In due course she can be shifted to the Foreign Office. For now, she’s safe.