Rachel Reeves is feeling the heat ahead of her Spring Statement

In a discussion ahead of next week’s statement, the chancellor hints at a more guarded approach amid global uncertainty – and issues a warning.

A thick skin is a must for our top politicians. There’s rolling news, nonstop social media and public scepticism. Add in the battle with the country’s deep and persistent problems. And these days the problems include constant and very real global turmoil.

The questions for the politicians are profound and that’s something the Chancellor Rachel Reeves gets.

“I recognise that with the privilege of doing a job like the one I’m doing today also comes a great deal of scrutiny. I absolutely believe that every policy that I announce, every pound of public money, of taxpayers money that I spend, and every pound that I take from people in terms of taxes is properly scrutinised. That’s part of the job,” she tells me.

But next comes an admission, from this professionally tough politician, described to me by one of her colleagues once as ‘hard as nails’, that when things get personal, she doesn’t like it.

“One of the things I think that I find hard, even with the thicker skin I guess I must have developed over these last 14 or so years, is some of the personal criticism because that’s not the sort of politics that I do,” she tells me.

As admissions go it’s modest and general in nature.

But read in the context of someone who is taking decisions with big consequences for many, many people’s lives while at the same time being someone who has faced awkward questions about her own job history and CV, this may be Reeves’ way of telling us that she’s feeling the heat.

Perhaps the admission came because this was an unusual conversation. We were not under the studio lights but instead in the Treasury itself for the making of a BBC documentary, The Making of a Chancellor, trying to understand the thinking behind the big decisions Reeves takes.

Our conversation came a couple of hours after the Labour government had revealed billions of pounds of welfare cuts, most notably stricter tests for personal independence payments (Pips). The aim is to save £5bn by 2030.

But there is real anxiety in her party about what she and Sir Keir Starmer are doing.

And when I ask the chancellor about these cuts, she prefers to speak about Labour’s broader vision for the economy, instead giving a warning – that this Labour government won’t be able to do what its members and backers might have expected and hand out handsome increases to government departments like its predecessor.

“There’s growth, real growth every year actually, in public spending, but not at the levels that we were able to deliver under the last Labour government when the economy was growing much more strongly,” she tells me.

“We’ve got to ramp it up and continue to ensure that we’re doing everything we can to lift living standards and in the end that is through growing the economy. We can’t tax and spend our way to higher living standards and better public services. That’s not available in the world we live in today.”

The signalling for the Spring Statement is that there will be no more tax rises and no more increases in government spending, instead a scalpel is set to be taken to some departments. This is the opposite of what she did in the autumn and the opposite of what you’d assume Labour chancellors do.

This more guarded approach is in part a response to the uncertainty created by the Trump administration – nobody knows quite what is around the corner.

But she has been taking inspiration from across the Atlantic for many years.

One of Reeves’ first jobs was working as an economist at the British Embassy in Washington from 2002 to 2003. That era defined her early thinking and she’s still gazing to America for inspiration – Reeves’ first call as chancellor was to Janet Yellen, then her counterpart in DC as treasury secretary in president Joe Biden’s administration.

I ask Yellen for her advice to Reeves now, nearly a year on. She says to keep doing the difficult things: “I think she [Reeves] should, you know, stick with the course that she set out and move things, move things forward with, you know, as much speed and commitment as she possibly can.”

But there is tension in Reeves’ approach. Labour is increasing tax, but squeezing some spending. Ministers are rolling back some rules and regulations, but giving workers more rights at work. In effect they are putting the brakes and the accelerator on at the same time.

She is aware there is no one thing she can do to suddenly create prosperity. And so how long can people be expected to wait for the change they’ve been promised?

Communication is key according to Yellen: “Before you get improvements that are noticeable to voters in infrastructure and job creation, it does take time and so you don’t get the immediate payoff.

“And so communication, I think, is very important to make the population understand that this is an approach that requires some patience to see the payoff. But truly, it’s the only way, over the medium term, to boost living standards in major economies.”

Reeves is asking voters to believe that some of the tough choices she is making can be explained, at least in part, by the fact that the world around her has changed in a way she hadn’t anticipated when her party was beginning to prepare its new offer to the public in the aftermath of Labour’s 2019 election defeat.

First, a massive £28bn borrowing that had been earmarked to spend on green projects was binned, a necessary response to the economic turmoil under Liz Truss according to Labour – not a view shared by opponents who never thought Labour’s policy credible.

Whereas once she said she would be the first green chancellor, now Reeves is signing off airport expansion at Heathrow, proposing to get rid of regulations, and ousting the regulator at the Competition and Markets Authority (CMA).

Labour argues the country’s economic books were worse than expected when they took power. And much more recently, uncertainty over Donald Trump’s willingness to support Ukraine and Nato more widely has seen the UK commit more money to defence.

“The world has changed, [we] can see it before our eyes, in a whole number of respects,” Reeves tells me.

“[We are seeing] greater instability and insecurity in the world, Europe having to take on a bigger role in our continent for our own defence.”

But to some, Reeves’ willingness to change course raises the question as to what kind of Labour politician she is.

The cuts to welfare are at the heart of this. At Prime Minister’s Questions, Sir Keir declared that welfare reform was a “moral issue”, while the veteran left-wing MP Diane Abbott argued there was “nothing moral about cutting the benefits of millions of people”.

Reeves sat out much of Labour’s doomed period with Jeremy Corbyn as leader. She was always serious, watchful, with an eye on her party’s and her own future.

When she became shadow chancellor she put enormous efforts into schmoozing the city, even if she did once confess she’d instruct her team to sweep up any left over pastries at the end of their business breakfasts.

Reeves sees herself as a pragmatic politician, not an ideologue, whether that means increasing taxes in her first budget to fund public services or conversely cutting benefits in this week’s statement.

Deborah Mattinson was Sir Keir’s director of strategy up until the election. She argues Reeves is canny and it is her values that make her Labour.

“She is very, very savvy. She’s good at looking around corners.

“It’s a cliche to say she’s a chess player, but actually it is true that she’s not somebody who deals with the problem that’s right in front of her and leaves it there. She’s somebody who is able to look several moves ahead and always has that slightly longer-term focus.”

Reeves would tell you her politics were made at home, her values that of the south London girl who worked hard and made it to the Bank of England, her economics crafted by study and experience but also the requirements of getting elected – remember she chose politics not economics after all.

That, according to Deborah Mattison is key. The decisions Reeves takes are based squarely on ensuring Labour is viewed as economically credible. The argument is that if it isn’t seen as sufficiently credible it won’t be in power and then nothing else really matters.

“You can’t win an election if you’re not trusted to run the economy. And Labour has a historical problem that goes back a very, very long way,” she tells me.

“After [the election defeat] in 2010, that all dissipated… [and] the Corbyn years, really, really were problematic. So that’s the situation that she inherited and we were no further forward by the time she was appointed shadow chancellor.

“By the time we went into the election, she had a double-digit lead over her Tory opposite number. That is one hell of an achievement.”

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Like her predecessors in New Labour, Reeves takes the view that the public is less interested in Labour’s economic ideology and more interested in delivering economic prosperity. (Her opponents on the left of the party would argue a clear ideological stance and economic success are not mutually exclusive).

However there is one clear division between Reeves and Gordon Brown, chancellor between 1997-2007. Whereas Brown made little secret of his craving to be prime minister, Reeves says she doesn’t have the same goal.

“I honestly have no desire whatsoever to do that job. That’s not always the answer you might get from chancellor of the exchequer, but in my case, it’s absolutely true. The job I’ve always wanted is this one.

“And I’m very, very lucky because there aren’t many people in politics or in other walks of life that manage to do the job that they’ve always dreamed of perhaps. And for me, I’m doing that today in this job.”

But make no mistake, next week’s Spring Statement is the stuff of nightmares for a Labour chancellor. Her party will hate the cuts to welfare.

And at the same time, borrowing and unemployment are ticking up and there is no sign of the economy budging, even though getting it to grow is Labour’s number one mission.

Rachel Reeves is the architect and face of her government’s economic plans. If she is indeed feeling the heat, perhaps it’s little surprise.

The Making of a Chancellor is on BBC Sounds from Saturday 00:01and on BBC Radio 4 on Monday at 16:00 and Tuesday at 09:30

Additional reporting: Jake Morris. Top picture credit: Getty Images

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