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What does the country need from Rachel Reeves?

Downing street Henley H Ballot Box Rachel Reeves

Rachel Reeves, the newly appointed Chancellor of the Exchequer, is to many a relatable figure. She grew up as a daughter of teachers, attended a state school, and had a quite ‘normal’ life. Many have then witnessed her working hard in her profession as economist at the Bank of England first and then in her party, with a duty ethic that has helped her to move onwards and upwards. This is not just the narrative of a politically ambitious woman, as some have defined her, but it is the push that often comes with the responsibilities of social mobility.

Broken the glass ceiling only to face the cliff?

Mrs. Reeves is the first woman to achieve the Chancellor’s position and this has naturally made headlines in the entrenched and inequal political world we still witness in the 21st century. We know that she has been ‘standing ready’ to become the Chancellor for quite some time now - she has been Shadow Chancellor since 2021, has been mentored into the role, amongst others by Alistair Darling, and has earned her party’s respect as main economic personality over many years. Yet some may still wonder: does she stand on a ‘glass cliff’, after she has broken the ‘glass ceiling’? Is she in some ways faced with an impossible task? And does her background make her more likely to understand and be able to tackle the problems facing British households in the past few years?

What Mrs. Reeves inherits now is a country that - despite having contained high inflation and avoided recession - offers lower living standards to its population. The ONS data on GDP show that growth has been near zero since early 2022 and GDP per capita is lower in the first quarter of 2024 than before Covid-19. This means our living standards are worse now than prior to the pandemic. Also, GDP is expected to grow by ‘only’ 0.9% in 2024 and for the next few years, unless policies are implemented to boost growth. So, what challenges need tackling to promote growth?

Growing the economy

Mrs. Reeves has often repeated she will target growth and investments without relying too much on public debt. She has competently talked about problems of low investments, low productivity, energy insecurity, and political instability that have affected the UK economy in the 21st century. She has proposed her model of ‘secureconomics’: a mix of economic stability (fostered via a balanced budget and contained debt) and stronger but selective business-government partnerships for investments.

But the challenges are many and she will need to walk on a tight rope. British growth is tied up to Britain’s position in international trade after Brexit, in energy market provisions, in geopolitical stability, and to the need to foster innovation and embed sustainability. We need further investments in renewable energies and into the green economy, and a more cohesive and productive workforce.

She has to make the important decisions on how to drive this growth and productivity. Her reforms need - for example - to address the growing economic inactivity: some of which is driven by higher numbers of workers reporting long-term sickness (a by-product of NHS problems). In addition to maintaining a healthy working population, her growth plans need to be achieved without deepening regional inequalities and socio-economic divisions. A hint of this has appeared at the announcement of the policy of introducing VAT on private schools, one of the most contended parts of the Labour economic manifesto.

Cultural factors

Investments and growth require first and foremost to bring the country together, closing the socio-cultural gaps between Remainers and Brexiteers, North and South, state and private school-educated people, to grow more harmoniously together. It means reviving public services, to address the problems of working-class families without dogmatic attacks on higher-income families, increase workers’ productivity, and lure not just domestic businesses into a profitable partnership but also foreigner investors. Finally, it requires bringing British Universities back to the centre of the country’s growth projects, as Universities are focal to the country dynamism and innovation. They provide solutions for sustainable business growth and climate change while promoting the UK’s internationalism, its reputation, and global cultural role.

However interesting the differences in personal background amongst our politicians may be, what the country really needs from Mrs. Reeves is focus, competence, the ability to listen and understand, dynamism and strength to reform. Woman or not – she has a challenge ahead of her, but also an opportunity.

Dr Miriam Marra

Associate Professor of Finance

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