Why Rachel Reeves Faces Dark Clouds Despite Her Multi-Billion Pound Spending Spree

Labour MPs saw a different side to Rachel Reeves on Wednesday evening.

Fresh from delivering her spending review, the chancellor faced a meeting of the Parliamentary Labour Party, telling them to go out and “sell” what she had just announced to voters.

“People are only going to know the good news that we set out today if we campaign on it, if we deliver the leaflets, if we speak to people on the doorstep, if we write those pieces for our local papers, that is how people are going to know that it is Labour making these differences,” Reeves told them.

So far, so unsurprising. But those present detected a marked change of tone from the chancellor, who has often appeared to have the weight of the world on her shoulders over the past 11 months.

“She joked, she laughed and she looked well,” said the MP. “She was like a woman released.”

When the winter fuel debacle was raised, Reeves acknowledged that mistakes had been made since Labour won the election.

“That shows she gets it,” one backbench MP told HuffPost UK. “She knows where she is in the popularity stakes and there’s no way you don’t feel that personally. She’s not Cruella de Vil. But this felt like a reset moment for her.”

Among the jokes, however, there was a nod to the often-fractious negotiations with her Cabinet colleagues as their departmental budgets were set.

The last hold-out was home secretary Yvette Cooper, whose refusal to accept the real-terms cuts she was facing eventually led to Reeves taking the highly unusual step of imposing a settlement on her.

At the PLP meeting, Reeves admitted to being “peed off” with police chiefs complaining about a lack of cash after receiving a 2.3% increase in their budget.

“I don’t think they would have said that without Yvette giving them the nod,” one MP said.

For the moment, however, Labour MPs from across the party’s various factions seem pretty pleased with what Reeves announced.

Chris Curtis, co-chair of the Labour Growth Group, said: “We were pushing for greater investment in affordable housing, infrastructure, and research and development and we’ve seen major commitments on all three.

“These are the foundations of sustainable economic growth, and with them we can start to deliver what the British people rightly expect: rising wages, economic security, and properly funded public services.”

Jo White, the MP for Bassetlaw and chair of the Labour Red Wall Group, said the spending review – which included billions for better transport links in the north and Midlands – had been “the starting gun” on the next election.

“We welcome that the government is listening to the Red Wall,” she said.

Reeves might find her spending spree is a tougher sell across the country, however.

A focus group carried out in Coventry after the spending review by the More in Common think-tank offered further proof of the widespread disillusionment there is in the country with politicians.

All of those taking part had voted Labour last year, but been unimpressed so far by the party’s time in office.

“Growing up when you voted for Labour, you knew what you were voting for,” said Deena. “I think at the moment, they’ve just gone back to blaming things on the Tories and not giving stuff they promised.”

On what Reeves had announced, therapy assistant Caroline said: “She just says what she thinks we want to hear. And we do want to hear it. But will we see it? I definitely won’t hold my breath.”

Ed Hodgson, More in Common’s associate director of polling and analysis, said: “Behind all the numbers from the spending review, it’s clear from the voters we spoke to in Coventry that they’re running out of patience and want to see real improvements in their day-to-day lives.

“That’s going to be the real test of whether the chancellor’s financial calculations, and her belief in UK growth giving her future headroom, can actually pay off politically.”

“She knows where she is in the popularity stakes and there’s no way you don’t feel that personally. She’s not Cruella de Vil”

The ink on Reeves’ spending review speech had barely dried before the Office for National Statistics announced on Thursday morning that the UK’s gross domestic product (GDP) shrunk by 0.3% in April.

For a government’s whose number one mission is supposedly growing the economy, this was sub-optimal.

A senior No.10 aide was sanguine telling HuffPost UK that they had been braced for bad news.

“You can overdo the month-to-month stuff,” he said. “The month before growth was up 0.7%.

“But we’ve never shied away from the fact that there’s a lot to do on GDP and we always knew that April was going to be tricky.”

Critics have dubbed Reeves the “Klarna chancellor”, insisting that the billions of pounds of spending she announced on Wednesday will have to be paid for later, most likely by hiking taxes in the Budget.

Reeves, who put up taxes by £40 billion in what was meant to be a once-in-a-parliament move last autumn, has refused to rule out coming back for more this autumn, while also insisting that the spending review was “fully funded”.

“We didn’t put up taxes in the autumn for no reason, we had to do it, and the choices we had was either to put up VAT on everyone or ask businesses to pay a bit more,” said one senior government figure.

“We don’t relish tax rises, but we need to put the public finances first.”

But one Labour insider accused the chancellor of “boxing herself in” by sticking to her fiscal rules, which forbid any borrowing to pay for day-to-day government spending.

“It’s their starting position on everything,” the source said. “You can argue that’s the best possible starting point, but equally you can say at some point, shouldn’t your starting point be how do we win that election or deliver the plan for change?”

With all the talk of more tax rises, one seasoned observer suggested that Reeves may in fact have something much more radical in mind.

“The big unknown, and which will only begin to take shape in 2027, is will this hairshirt being worn now give Rachel a war chest that will allow her to do a big tax cut before the next election?” they said.

“Mind you the recent track record or pre-election tax cuts is not great, given Jeremy Hunt did three of them and the Tories still got hammered.”

If Labour are to avoid the same fate in 2029, Reeves needs to hope that the spending spree she announced on Wednesday delivers tangible improvements to the lives of ordinary voters – and soon.

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Rachel Reeves Takes Axe To Whitehall Departments To Pay For Health And Defence Cash Splurge

Eight Whitehall departments will see their budgets slashed so that more cash can be spent on the NHS and defence.

The Home Office and Department for Transport are among those facing real-terms reductions in their day-to-day budgets as a result of chancellor Rachel Reeves’s spending review.

She announced that an extra £300 billion will be spent by the government over the next three years.

The NHS will enjoy a 3% rise in its budget after inflation, which works out at an extra £29 billion a year.

Meanwhile, defence spending will rise from 2.3% to 2.6% of gross domestic product (GDP) by 2027.

An extra £39 billion will be spent on building affordable homes over the next 10 years, while £14 billion is being spent on a new nuclear power plant at Sizewell C.

Reeves told MPs that departmental budgets will increase by 2.3% in real terms under plans.

She said she was “reflecting the choices of the British people” as she accused the Tories and Reform of having no plans for the economy.

But Treasury documents later revealed that a number of Whitehall departments will see their day-to-day budgets fall once inflation into account.

The Home Office faces a 1.7% fall, with the transport budget being reduced by 5% and the Department of the Environment, Food and Rural Affairs being cut by 2.7%.

Paul Johnson, director of the Institute for Fiscal Studies, said: “The crux is that most departments will have larger real-terms budgets at the end of the parliament than the beginning, but in many cases much of that extra cash will have arrived by April.

“Eight departments will actually see cuts to their budget between this year and the end of the parliament.”

Police chiefs warned that the Home Office funding settlement will make it “incredibly difficult” for them to hit the government’s target of recruiting an extra 13,000 frontline officers.

Liberal Democrat Treasury spokesperson Daisy Cooper accused Reeves of “smoke and mirrors”.

She said: “This spending review was a missed opportunity to repair the damage done by the Conservatives and finally deliver on the promise of change.

“Behind the smoke and mirrors is a potential blackhole for social care as local government budgets remain at breaking point. Putting more money into the NHS without fixing social care is like pouring water into a leaky bucket.”

Sadiq Khan, the Labour mayor of London, also attacked the chancellor, claiming the capital had missed out on much-needed funds.

He said: “I remain concerned that this spending review could result in insufficient funding for the Met and fewer police officers.

“It’s also disappointing that there is no commitment today from the Treasury to invest in the new infrastructure London needs. Projects such as extending the Docklands Light Railway not only deliver economic growth across the country, but also tens of thousands of new affordable homes and jobs for Londoners.

“Unless the government invests in infrastructure like this in our capital, we will not be able to build the numbers of new affordable homes Londoners need.”

Shadow chancellor Mel Stride said the spending review was “not worth the paper that it is written on” and will inevitably lead to taxes going up in the autumn Budget to pay for it.

He said: “This is the spend now, tax later review, because [the chancellor] knows she will need to come back here in the autumn with yet more taxes and a cruel summer of speculation awaits.

“How can we possibly take this chancellor seriously after the chaos of the last 12 months?”

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Rachel Reeves Announces £39 Billion Housing Boost As She Vows To ‘Renew’ Britain

Rachel Reeves will announce plans to spend nearly £40 billion building affordable homes in a bid to solve the UK’s housing crisis.

The chancellor will outline details of the cash boost in the spending review on Wednesday.

It will be seen as a major victory for Angela Rayner, the deputy PM and housing secretary, who has been locked in a battle with the Treasury for more funding for her department.

Under the plans, £39bn will be spent over the next 10 years on a social and affordable homes programme, which works out at £3.9bn a year.

The last five-year programme, which comes to an end in 2026, was worth £11.5bn, or £2.3bn a year.

A government source said: “The government is investing in Britain’s renewal, so working people are better off.

“We’re turning the tide against the unacceptable housing crisis in this country with the biggest boost to social and affordable housing investment in a generation, delivering on our commitment to get Britain building.”

Reeves will confirm plans to spend billions on new transport links in the north and Midlands, and fund the completion of a new nuclear power station at Sizewell C.

The NHS and Ministry of Defence are expected to be the big winners in the financial settlement, with other departments facing real terms cuts to their budgets as Reeves tries to balance the nation’s books.

The chancellor will tell MPs: “This government is renewing Britain, but I know too many people in too many parts of the country are yet to feel it.

“My task – and the purpose of this Spending Review – is to change that.

“To ensure that renewal is felt in people’s everyday lives, their jobs, their communities.

“So that people can see a doctor when when they need one, know that they are secure at work and feel safe on their local high street.

“The priorities in this Spending Review are the priorities of working people. To invest in our country’s security, health and economy so working people all over our country are better off.

That is what this Spending Review will deliver.”

She will add: “I have made my choices. In place of chaos, I choose stability. In place of decline, I choose investment. In place of retreat, I choose national renewal.

“These are my choices. These are this Government’s choices. These are the British people’s choices.”

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