Why talk of replacing Rachel Reeves with Gordon Brown shows depths of Labour's troubles

As Chancellor, a newly ennobled Lord Brown would command the respect of international financiers like no other Labour politician, potentially with a real effect on the economy

It was last autumn, November 25 to be exact, that I suggested the Prime Minister should reboot his government by sacking his Chancellor. I'm sure there were a good few Labour supporters laughing at my description of how the UK economy was reacting badly to Rachel Reeves’ Halloween budget – but I doubt they are laughing now.

Such is the never-ending flow of bad news and a growing sense of economic crisis, the Chancellor loses more credibility with our financial institutions every week. Sometimes it seems like every day. Last week’s bond market crisis is by no means solved and there are more official figures due that will put further pressure on the pound.

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The worst that can happen to any politician, but especially a government minister, is becoming a figure of ridicule. Reeves has already achieved that – "Rachel from Complaints" or "Rachel from Accounts" are the current soubriquets of choice, you take your pick.

Keir Starmer could replace Rachel Reeves with Gordon Brown as Chancellor by elevating the former Prime Minister to the Lords (Picture: Leon Neal)Keir Starmer could replace Rachel Reeves with Gordon Brown as Chancellor by elevating the former Prime Minister to the Lords (Picture: Leon Neal)
Keir Starmer could replace Rachel Reeves with Gordon Brown as Chancellor by elevating the former Prime Minister to the Lords (Picture: Leon Neal) | Getty Images

Doom and gloom

Two examples of conjecture are currently doing the rounds, making the Chancellor's departure look more a question of "when" rather than "if". The first has been a tongue-in-cheek suggestion, causing guffaws of gossip, that due to a shortage of talent within Keir Starmer's Cabinet the only credible option for him is to copy what Rishi Sunak did by bringing back David Cameron as Foreign Secretary – by appointing Gordon Brown as a replacement Chancellor.

It might take the reputed brainpower of Brown to solve the mess Reeves has made of the public finances and create some optimism in the Labour ranks. Let us just run through the problems that the Prime Minister faces.

The top priority of his government – said repeatedly by both Reeves and Starmer before and after the general election of last July was to deliver growth. Every government decision and action taken was to contribute to economic growth improving.

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After some encouraging growth figures inherited from the Conservatives, it did not take long for the Chancellor to talk down the UK economy and create a mood of doom and gloom.

Spending cuts

Then came the Budget that has turned farmers, small and large businesses and pensioners against Labour and rocked the economy. With £41.25 billion of tax rises stifling private sector growth and delivering job losses we now face a "Reeves Recession". That in turn will require a further unplanned Spring Budget on March 26.

The expectation is that additional tax increases will be necessary to bolster the public finances – but such a policy will only dampen growth further. Reeves could increase public borrowing, but this also would be on top of the planned increase in borrowing and undoubtedly break the fiscal rules she created to give the markets reassurance.

This leaves the only alternative as unplanned public spending cuts on top of budgets that were already planned to tighten in the later years of Labour's anticipated term. Politically this would cause a civil war in Labour as MPs would break yet more promises while facing elections in Scotland and Wales in 2026, as well as by-elections that will be necessary.

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Serious heft

Starmer will do everything to keep Reeves in post for as long as possible, as they are inextricably linked in policy and strategy. Each has supported the other in their pronouncements, indeed without Reeves providing a vision of smart-suited, business-like competence, Labour's economic policy would have been a serious electoral weakness. Unfortunately, delivery has failed to match perceptions.

Having a Chancellor with an economics degree who worked at the Bank of England provided credibility but nobody appeared to ask if she counted gold bullion or plastic paperclips.

A newly ennobled Lord Brown would bring serious heft to the role and command the respect of international financiers in a way no other Labour politician could manage. It could steady the currency and possibly help prevent interest rates having to go up when we actually need them to come down.

Wheeling in a Lord to a serious Cabinet role is not just a ploy the Tories have used with David Cameron in 2024 and Peter Carrington (also Foreign Secretary) back in 1979. It is often forgotten that Gordon Brown himself elevated Peter Mandelson in 2008 to the Lords so he might serve as Business Secretary, lasting in that role until Labour's defeat in 2010. Interestingly, his deputy who attended Cabinet and did the graft in the House of Commons was Peter McFadden MP, currently the Chancellor of the Duchy of Lancashire – another name being touted to replace Reeves.

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IMF bailout?

It would not be impossible for Brown to be Chancellor from the Lords and McFadden to represent him in the Commons (as Chief Secretary to the Treasury) although it would of course be highly controversial and point to a strategic failure of the Starmer government.

Yet this is the scale of the failure that is coming down the tracks. Were the Labour government to be forced by markets and a run on the pound to go to the International Monetary Fund for support it would be an existential moment for Labour. Austerity cuts would be immediate and severe, far deeper than what is currently being talked about.

I know many will say I am playing the role of Cassandra – but don't take it just from me. Only this week, the New Statesman editor George Eaton openly discussed the prospect of Starmer having to sack Reeves and find a replacement. That type of further conjecture simply would not have surfaced within Labour circles even in December.

Going for Brown would probably be a call too far for Starmer, but Reeves’ replacement by McFadden, the no-nonsense and experienced Yvette Cooper, who has an MSc in economics from the London School of Economics, or Environment Secretary Steve Reed is now a real prospect. And it’s not yet February.

Brian Monteith is a former member of the Scottish and European parliaments and a senior advisor to the Tax Reform Council

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