Rachel Reeves insists she won’t “gaslight” working people over her plans to turn round the economy as she launched a scathing attack on Reform’s offer to voters, saying Nigel Farage “hasn’t got a clue”.
With many people still struggling with the cost of living, the chancellor defended her approach which has so far focused on economic stability, arguing that it was impossible to turn round years of poor performance under the Tories in just six months.
Reeves has had a challenging start as chancellor, with her proposals to boost sluggish growth coming under intense scrutiny.
The Bank of England warned this week that Britain was on the brink of stagnation, amid the fallout from her budget and the threat of Donald Trump reigniting global trade wars.
However, she pledged a renewed focus on growth in the new year, taking on the “vested interests” which had blocked infrastructure development, and requiring ministers to demonstrate that every policy will improve the situation.
And with the latest polls indicating that Reform UK is growing in popularity as economic progress stutters, Reeves launched a broadside at Farage and his party’s lack of fiscal credibility.
“What’s Nigel Farage’s answer on the economy? How is he going to make working people better off? He hasn’t got a clue. How’s he going to grow the economy? He’s not got the faintest,” she said.
Reeves has faced unhappiness from Labour MPs over her economic priorities after cutting winter fuel payments for pensioners on modest incomes and refusing to compensate Waspi women, as well as criticism from business over increasing national insurance for employers.
Yet in an interview with the Guardian, the chancellor said that she would make “no apologies” for her decisions, which she argued had been necessary to restore economic stability, as she doubled down on her “iron chancellor” image.
“I know there are people that disagree with things I did in the first six months and in the budget, and there’s a lot of commentary on it. But I don’t see people putting forward alternatives, in the Conservatives or the media. In my position I don’t have the luxury of just commentating or criticising, I have to choose. I have chosen.”
She shrugged off Labour MPs’ concerns that her decisions could further damage public trust in the government, claiming the national insurance rise had not breached an election promise. “We’re sticking to our manifesto and that’s really important because the public have been burnt by politicians who haven’t delivered on theirs.”
However, she declined to say exactly when people would start to feel better off, suggesting it was a “subjective” matter and that she did not want to tell the public the economy had recovered when that was not their own experience.
“It will take time for that to be felt by people after the damage that’s been done the last few years. I don’t want to gaslight people. I know that people are really struggling.”
Speaking of the possibility of Farage’s popularity posing a threat to Labour with working voters, she said: “He has no idea on the biggest issue that matters to voters, which is tackling the cost of living crisis. I’m very happy to have an argument about the economy, but I’m not sure what he’d have to say.”
Reeves will make a speech in January setting out the government’s plans for the economy next year, arguing that she has now “fixed the foundations” by restoring economic stability and will now turn to delivering manifesto pledges.
But she admitted there was “no single silver bullet” to boosting growth, with planning, pension and regulatory reform all helping, after the Bank sharply downgraded its forecasts for the British economy on Thursday, predicting zero growth in the final three months of the year.
Reeves said she remained confident that the government would outperform the anaemic growth forecasts over the next few years. “You can’t turn round 14 years of poor economic performance in six months,” she said.
Accusing the Conservatives of leading Britain down a “path of decline” by blocking infrastructure developments, she said she would fight “vested interests” who opposed new projects including pylons, reservoirs and housing.
She urged potential opponents to back Labour’s landmark planning and infrastructure bill that will go through parliament next year, saying: “If you try and block this, all you will do is delay the change that our country voted for and desperately needs.”
With Trump returning to the White House, raising the prospect of damaging tariffs, she vowed to argue the case with the US that free trade would benefit it too, aided by the new British ambassador, Peter Mandelson, to whom she speaks regularly.
While she would not be drawn on a migration pact with the European Union – which experts say could be a necessary trade-off – she acknowledged Britain needed stronger trade relationships with Europe to deliver growth.
Every minister proposing a policy will have to show it would boost growth, under a change to be introduced in early 2025. “Negative growth is not getting signed off,” said one source.
Reeves insisted no more tax rises would be needed to plug the gap created by the slow economic recovery – hinting she would back cuts instead. “Public spending now needs to live within the means that we’ve set out for it. We’re never going to have to do a budget like what we’ve just done.”
Yet more difficult decisions lie ahead in the spring spending review, with the chancellor indicating that Whitehall departments could be asked to find more than the 5% “efficiency savings” already set out to balance the books.
Reeves will head a UK trade mission to Beijing next month, saying she will “bang the drum” for British business to increase exports. Officials suggested she had been leading opposition to China’s inclusion in the “enhanced tier” of the foreign interests register scheme.
However, she said there were areas where it was “not appropriate” for China to have a foothold in UK markets – and that national security would always come first. “I’m never going to compromise on that,” she added.
