The political economy of Rachel Reeves: The return of One Nation Labour

By Adam Peggs

Rachel Reeves’ appointment as Shadow Chancellor of the Exchequer in May of this year caused concern on the left of the Labour Party while being welcomed by many on Labour’s centrist wing. The decision to replace Anneliese Dodds, who served in John McDonnell’s Shadow Treasury team, with the former Bank of England economist and ‘moderate’ stalwart appears to be a signal that the leadership is taking a more avowedly centrist path. Electorally this strategy has yet to bear fruit, with Reeves’ polling as preferred Chancellor broadly in line with her predecessor. However, it is still early days.

The big question around Reeves’ tenure as Shadow Chancellor is what economic policy direction she intends to take. Anneliese Dodds was hoped by some to offer much-needed continuity between the ‘New Economics’ advanced by John McDonnell and the different course being charted by the new Labour leadership. With Reeves heading up the Party’s biggest policy brief, we will no doubt get something very different.

Entering Parliament in 2010, Reeves served as Shadow Chief Secretary to the Treasury and later Shadow Work and Pensions Secretary under Ed Miliband. During this period, Reeved found a reputation for uncompromising positions, suggesting that Labour should not represent those out of work and that the party would be ‘tougher’ than the Tories on claimants. In 2015, this resulted in the party offering a ‘Compulsory Jobs Guarantee’ for the young, scrapping unemployment benefits for 18-21 year olds (to be replaced with a more conditional ‘Youth Allowance’) and backing the benefits cap and a cap on ‘structural social security spending’.

Since then, Reeves has taken a different economic direction with an interest in wealth taxation, Community Wealth Building and the ‘everyday economy’ – goods and services that have a foundational role in people’s daily lives. There are some on the left who hope that this work could guide the party’s new economic policy agenda – but the evidence so far does not give much cause for hope.

This turn in Reeves’ economic thinking is detailed extensively in her 66-page pamphlet The Everyday Economy. The pamphlet praises McDonnell’s Alternative Models of Ownership report and backs workers on company boards, better trade union rights and Employee-Owned Trusts – a form of indirectly worker-owned company established by the Coalition government. To an extent, the document also draws on ideas around Community Wealth Building as a way of devolving power, promoting the living wage and reducing regional inequities. The pamphlet also offers a critique of neoliberalism, criticising the extension of the market and advocating an economics which prioritises reciprocity and the ‘common good’ in its place.

This should not so much be seen as an embrace of the economics of Labour’s 2017 manifesto, but as a certain kind of economic thinking from a ‘moderate’ centre-left standpoint. Reeves argues that Labour’s popular 2017 manifesto was “regressive” and criticises its lack of “fiscal rectitude”. She writes of companies’ “sense of common purpose” as having been “lost”, as if capitalism was ever about generating social value.  

Reeves praises “British social virtue” and “the British Enlightenment” as the sources of strength for the labour movement. The historical British labour movement is hailed for its emergence from “parochial and conservative” cultures and an emphasis on “rootedness”, “self-reliance” and “self-improvement”. And the family is emphasised as “society’s most important institution”, with Reeves adding “a stable home is the foundation for a successful life”.

As a framework, it is both social democratic on the one hand and patriotic, traditionalist and Anglocentric on the other – echoing the kind of ‘Blue Labour’ thinking advocated by Maurice Glasman and Jonathan Rutherford. Notably, Rutherford is thanked at the beginning of the pamphlet. This looks like social democracy built on conservative foundations, harking back to the sentiment of Ed Miliband’s 2012 ‘One Nation Labour’ slogan.

Last September, the Financial Times spoke of Reeves as endorsing a “move to the centre” for party policy. More recently, in her first interview as Shadow Chancellor, Reeves emphasised her desire to ensure Labour is “on the side of British businesses” continuing the leadership’s effort to assure business owners and particularly the CBI and the banks.

Reeves’ economic plans have been focused on the intention to “reshore” jobs, an objective shared with Joe Biden and Kamala Harris and not dissimilar to Corbyn’s “buy here in Britain” plans from 2018. Reeves has been particularly keen to connect this policy agenda to a sense of British economic patriotism, a clear continuity between the Everyday Economy pamphlet and Labour’s current political orientation.

Labour’s ‘Buy British’ plans unveiled in July, the first major policy intervention from Reeves, argued that the UK needs to be “investing in reshoring jobs in the same way we invest in foreign direct investment, by helping every business considering reshoring access the expertise and support they need”. This is a policy with its own merits, but with a lack of clarity on its intentions – whether intended as a pivot away from neoliberalism, as a complement to the geopolitical-economic power delivered by British foreign direct investment or some combination of both.

Reeves has argued the policy is not just “slapping a flag” on procurement but is about good jobs and apprenticeships and protecting the environment. Yet despite this, the policy contained relatively little detail on either pay and conditions or the environment.

The party has also recently called for more support for steelmakers, but has not publicly welcomed the government’s policy to bring Sheffield Forgemasters into public hands under the Ministry of Defence. This is despite the enormous popularity of calls to re-nationalise steel.

It is also worth highlighting that Labour’s recent policy development around a “Jobs Promise” for the young draws on the previous policy proposals developed under Reeves for the 2015 manifesto. The biggest difference is that the new version of the policy would not be funded by a tax on bankers’ bonuses, which had been one of Miliband’s flagship tax policies. The Jobs Promise poses certain problems. The promise is only a guarantee for long-term unemployed young people. Secondly, the promise only entails an offer of “education, training or employment” which could leave many recipients unable to access the opportunities they want and need.

In a similar fashion, Labour has now expressed an interest in promoting the “contributory principle”, a theme Reeves promoted as Shadow Work and Pensions Secretary. The principle would see benefit entitlements rise for those who have either earned more money before becoming unemployed or had a longer record of employment. Back in 2013, Reeves argued that this approach could be tied to benefit cuts – stating, “If you increase what you give to some people then presumably you have to reduce it for others. We are not in an environment where there is more money around” and endorsing the government’s benefit cap.

She also signalled support for regional changes in the cap, potentially leaving the North-East, Wales and Scotland with tighter caps on benefit levels than the South. Further, this contributory approach would likely disadvantage younger people and communities at greater risk of structural unemployment compared to those who’ve been more fortunate.

Another key strand of Labour’s policy direction under Reeves is an enthusiasm for Joe Biden’s economic agenda. Biden’s Presidency is still in its early days with some signs of progressive policymaking and other signs that this will all play out much like the Obama-era. In one of Labour’s first economic interventions since her appointment as Shadow Chancellor, Reeves backed Biden’s proposal for a minimum global rate of corporation tax and advocated for a 21% minimum rate – in line with Biden’s original plans and well above the preferences of Rishi Sunak. This is orthodox Labour, not radical and ambitious policy. But nonetheless it’s a shift from the party’s previous stances on calls for raising corporation tax.

The emphasis on big spending in Biden’s plans does not necessarily sit well with Reeves longstanding advocacy of ‘fiscal rectitude’ – and so it still remains to be seen how this tension will be resolved.

Reeves’ views on Europe will also likely play a significant role in Labour’s future economic plans. Having shaped Starmer’s Brexit policy around the end of the Brexit transition period, Reeves is now calling for trade ties with Europe to be “restored”. Going into more detail, Reeves has told the Financial Times that Labour would work to improve the government’s trade deal “by reducing bureaucracy on the movement of goods like food, drink and pets”. This is largely to be expected from a Labour Shadow Chancellor, though it confirms that Reeves expects to steer a middle path between those advocating some form of re-entry into the EU and those calling for a more wholehearted embrace of the government’s approach.

Just a few months into the role, Rachel Reeves’ economic vision is far from clear. What we do know already is that the policy agenda is unlikely to be continuity New Labour. However, there is a shared objective in the significant and ongoing effort to recast the party as a party of business and business owners aligned to the ‘centre’.

There are also currents in Reeves’ approach that draw substantially from both Blue Labourism and economic thinking around regionalism and local economic strategies. This may end up reviving the ‘One Nation Labour’ philosophy of Labour in the early 2010s. After all, some of the policies have returned already. It is this ‘One Nation’ approach that binds together the different components of Reeves’ thinking – the warm embrace for private enterprise, the stress on the ‘centre’, the focus on national pride and economic patriotism and the ideas borrowed and reworked from Community Wealth Building.

Adam Peggs is a writer and activist based in Deptford, London. 

Image:  Rachel Reeves. Source: https://api20170418155059.azure-api.net/photo/GzViho86.jpeg?crop=MCU_3:4&quality=80&download=true. Author: Chris McAndrew,  licensed under the Creative Commons Attribution 3.0 Unported license.

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