Rachel Reeves has been prudent. Now she needs a purpose.

LONDON — When Rachel Reeves was Britain’s shadow chancellor she liked to repeat an anecdote during interviews.

The Labour frontbencher would often quote the advice she received from the party’s longest-ever serving chancellor, Gordon Brown.

“Prudence is really important Rachel, but it’s got to be for a purpose. You’ve got to have a purpose,” Brown is said to have told her.

“Prudence for a purpose” was the unofficial title of Brown’s 1998 Budget, which saw his infamous “great clunking fist” keep a tight hold of the nation’s finances — while also announcing policies to raise living standards of the working poor.  

Now Reeves is chancellor herself, she has been quick to adopt the first part of Brown’s advice amid deteriorating economic projections and surging government borrowing costs.

The chancellor has already brought forward £14 billion of spending cuts this year, with more set to follow in June and autumn.

One minister, granted anonymity like others in this piece to speak frankly, said next month’s government-wide spending review will be “very tough” as Reeves prepares to announce real-terms cuts to a number of departments.

They said this had left many ministers infuriated with the process.

Some Labour MPs, aides and strategists are also concerned the chancellor has not been able to carve out a convincing political narrative which explains the coming cuts and how they feed into a long-term economic plan.

It’s left them asking: what is the purpose of her prudence?

Labour’s fiscal straitjacket

Reeves’ comprehensive spending review, unveiled June 11, will allocate government funding for each department from 2026 to 2029.

It may sound like a dry exercise, exciting perhaps only for Treasury bean counters or Westminster policy wonks. 

But the politics of it is absolutely crucial for a historically unpopular first term government.

Donald Trump’s tariffs have darkened Britain’s economic forecasts, but the reality is that indicators were already pointing south after Reeves unleashed £40 billion of tax hikes in October.

Recent polling shows the chancellor is now one of the least liked politicians in the country and some of her early decisions, designed to project fiscal discipline, are already being overturned.

The insurgent right-wing Reform UK, led by Nigel Farage, is also growing its lead over Labour by the month, even hitting double digits in some recent polls.

Despite these difficult circumstances, Reeves’ self-imposed fiscal straitjacket — a set of debt and deficit rules meant to signal credibility to the markets but already maxed-out — means she cannot splash the cash to boost short-term economic growth or pour money into day-to-day public services.

Gemma Tetlow, chief economist at the Institute for Government think tank, said things may be about to get even more difficult for the chancellor.

“Because they didn’t take into account Trump’s tariffs, the OBR [budgetary watchdog] looks to be at the optimistic end of the spectrum for growth forecasts over the next five years,” she said.                                             

“If they came more in line with the average of other forecasters, then that could make for an even worse forecast at the autumn Budget and the chancellor would have to deal with that.”

The tight fiscal situation has created tensions and infighting within the Cabinet in the lead-up to June 11, according to a government aide.

“The way Rachel has operated has caused massive rivalries because everyone is fighting for their political life. It’s really stupid,” they said.

“Because everyone is fighting for a limited amount of money in this very long, drawn-out process.”

A Treasury official said: “Negotiations are ongoing, as you would expect, but two weeks out the vast majority of departments have already settled.”

“At the spending review we will be prioritising that investment on the priorities of the British people and securing long-term economic growth,” they said.

What’s the story?

Others in government complain Reeves is not bringing the public along with her by crafting a political story about why these cuts are necessary.

So far, she has spoken about making “tough decisions” due to external economic shocks and the need to stick to her fiscal rules.

However, this is a message which has not resonated with a British electorate still grappling with the effects of a cost of living crisis and seeing the strains in multiple public services.

Labour’s difficulties in communicating a clear political narrative have been a constant criticism under the leadership of Prime Minister Keir Starmer.

Former Liberal Democrat Deputy Prime Minister Nick Clegg — veteran of a controversial coalition with the Conservatives that took an ax to public spending in the 2010s — last week advised Starmer that “storytelling matters enormously for the success of any government.”

“If you are running a government you must, above all, have a clear story about where the country has come from, where it is and where you want it to go,” he said.

A senior Labour MP said “the spending review is the single most important moment to get Labour’s story straight.”

They added: “Labour MPs simply won’t understand a plan that strips money from the social insurance of the poorest before we’ve exhausted every single last option to restore fairness to the tax system.”

The uncertainty in Reeves’ messaging is in stark contrast to David Cameron and Clegg’s coalition government, which brought in years of austerity after the global financial crisis ballooned Britain’s debt pile.

Cameron and his chancellor, George Osborne, argued Britain’s government debt levels were constraining economic growth and that a bloated public sector was crowding out private sector activity.

Despite facing years of unpopularity, the Tories managed to win an outright majority at the 2015 election and were seen by the public as competent economic managers.

A second government aide said Reeves should take a leaf from Elon Musk’s book in the U.S., pitching her own cuts as “about emulating DOGE and boosting efficiency and putting money back into the service of working people.”

“There was a genuine theory of state reform under Osborne that is clearly lacking now,” they added.

A Labour strategist said: “The spending review will not be a game-changer or something that really turns the gears — there won’t be a sugar rush.”

They added: “People will see it as a political failure in the short term. But in the long term, it may set us up for year five when we can say ‘it’s all been worth it’.”

There are also questions about the broader purpose of Reeves’ chancellorship, after all but junking a “securonomics” economic platform cultivated for nearly two years in opposition.

This was centered around a Joe Biden-inspired package of heavy state spending on green infrastructure to build the industries of the future and ensure Britain is not over-reliant on China for critical technology.

However, the backlash against the Democrats at the 2024 presidential election, combined with tight domestic fiscal conditions, means that Reeves doesn’t talk about securonomics anymore.

Now the government is left with individual economic policies — like infrastructure investment, pensions reform and environmental deregulation— but no coherent narrative to thread it all together, critics charge.

A second Labour strategist, close to No. 10 Downing Street, said: “Bidenomics showed that this model of economic policy can create lots of jobs and economic growth, but clearly people in the U.S. … didn’t feel it.”

“The government is putting a narrative together about working people and about putting more money in their pockets. But it’s just not always cutting through or getting to the top level for voters,” they added.

A No. 10 official waved away claims there was no economic narrative, saying the government was making “hard decisions for our long-term future that put money back in people’s pockets.”

However, they did concede that “we do need to get better at explaining the ‘why’ of what we are doing.”

Looking to the long-term

One area where the government should have a positive story to tell next month is on long-term capital spending.

The chancellor has a fiscal bazooka to invest in infrastructure projects, after changing her fiscal rules to free up an extra £50 billion.

This is because Reeves’ rules make allowances for extra borrowing to spend on capital projects.

She is expected to allocate more than £100 billion on capital projects spread across things like housing, hospitals, transport and energy.

The same minister quoted at the top of the piece said that “the public won’t tolerate cuts after austerity” and that “I don’t think any narrative around cuts will work.”

“The first budget showed we are a pro-investment, expansionary government and this is where we need to focus our attention,” they said.

However, the problem for Reeves is that the benefits of this long-term infrastructure spending won’t be felt for years to come.

And as John Maynard Keynes once said: “In the long run, we’re all dead.”

This Labour government may learn this the hard way, if it can’t communicate what it’s doing in the here and now to make Brits feel better off.