Is Rachel Reeves on borrowed time? | The Daily T / Rachel Reeves told it would be ‘politically suicidal’ to impose further cuts as economy falters

From 2h ago

09.24 GMT

https://www.theguardian.com/politics/live/2025/jan/14/keir-starmer-rachel-reeves-labour-kemi-badenoch-david-lammy-latest-politics-live-news?filterKeyEvents=false&page=with%3Ablock-6786197b8f086d39415c19c4#block-6786197b8f086d39415c19c4

 

Rachel Reeves told it would be ‘politically suicidal’ to impose further cuts as economy falters

Good morning. Rachel Reeves, the chancellor, is back from her trip to China and, according to Politico, she will make a statement in the Commons. This will allow her to address the criticism she has been facing about the rise in government borrowing costs, and what this means for her spending plans. Reading some of the Tory papers this morning you would think she is on the point of being sacked. This is more partisan wishful-thinking than objective truth-telling, but Reeves is is definitely in some difficulty, because she promised growth and events are not going as planned.

 

As Pippa Crerar and Jessica Elgot report, with the rise in borrowing costs putting the government at risk of breaking its fiscal rules, the Treasury is looking at potential cuts to balance the books.

 

No 10 backs Rachel Reeves to remain in post for rest of parliament

Yesterday all the flak coming at Reeves was coming from the right. But the Labour left have not entirely disappeared, and this morning John McDonnell, shadow chancellor under Jeremy Corbyn, was on the Today programme saying further cuts would be “suicidal”.

 

McDonnell, who is technically an independent MP at the moment because he had the whip withdrawn last year after voting with the SNP and against the government to get rid of the two-child benefit cap, told Today:

 

There is obviously a problem. There’s turbulence in the international markets, and we’ve just got to see those through.

 

And the way you do that is – you don’t turn to cuts, certainly, because not only will that … be politically suicidal, that would undermine the political support upon which Labour got elected.

 

But in addition to that, you would be taking demand out of the economy, and you would be looking at turning a crisis into a recession.

 

So I think you just have to see through the turbulence sets in the markets.

 

McDonnell said that, although market opinion mattered, the views of voters were more important.

 

There are two groups of people who make judgments on an incoming government. One is the international markets, the money markets, of course.

 

But actually the most important people are the electorate and I think what has to happen here is the electorate have to be protected.

 

Otherwise, I’m afraid, we’re looking at a level of disillusionment which then turns people towards, unfortunately, Reform. And I think that would be a disaster for the country. So it is important now to look at what the electoral response would be to another round of cuts.

 

McDonnell said he thought Labour’s problems went back to its failure to have an “open debate” about the state of the economy before the election. He said it was a mistake to rule out putting up income tax or corporation tax. Asked what Reeves should be doing now, he said Reeves should accept the need for a wealth tax.

 

You should tax the grotesque inequality that we have within our society – 16 million living in poverty, and yet at the same time, we’ve now created in our society 165 billionaires. And on the last calculation I saw, in the two years from 2020 to 2022, they made an additional £150bn of wealth. I think you have to look at redistribution.

 

McDonnell said this would be in line with the principles Keir Starmer set out when he talked about the need for those with the broadest shoulders to bear the biggest burden.

 

John McDonnell.

John McDonnell. Photograph: UK Parliament/Jessica Taylor/PA

We can be fairly sure that Reeves will not be adopting this advice when she speaks to the Commons later.

 

Here is the agenda for the day.

 

9.30am: Keir Starmer chairs cabinet.

 

11am: Russell Findlay, the Scottish Conservative leader, gives a speech.

 

11.30am: Downing Street holds a lobby briefing.

 

11.30am: David Lammy, the foreign secretary, takes questions in the Commons.

 

Morning: Starmer holds a meeting with the Iraqi PM, Mohammed Shia al-Sudani.

 

12.30pm: Lucy Powell, the leader of the Commmons, gives evidence to the Commons standards committee about the rules for MPs having second jobs.

 

After 12.30pm: Rachel Reeves, the chancellor, is expected to make a Commons statement about her visit to China.

 

Afternoon: MPs debate the final stages of the renters’ rights act before it goes to the Lords.

 

If you want to contact me, please post a message below the line or message me on social media. I can’t read all the messages BTL, but if you put “Andrew” in a message aimed at me, I am more likely to see it because I search for posts containing that word.

 

If you want to flag something up urgently, it is best to use social media. You can reach me on Bluesky at @andrewsparrowgdn. The Guardian has given up posting from its official accounts on X but individual Guardian journalists are there, I still have my account, and if you message me there at @AndrewSparrow, I will see it and respond if necessary.

 

I find it very helpful when readers point out mistakes, even minor typos. No error is too small to correct. And I find your questions very interesting too. I can’t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.