As we go to press it appears that Starmer has made his first move against his chancellor Rachel Reeves. Starmer has no understanding of economics but he does grasp that the huge drop in Labour’s position in the polls can mostly be explained by the economic policies that Reeves is following.
Darren Jones, who had been chief secretary at the Treasury, has been made Starmer’s chief secretary. One assumes his job is to advise Starmer when Reeves is taking fiscal (tax and spend) decisions that are politically disastrous.
Starmer has also appointed his own economic adviser called Minouche Shafik. She is a very orthodox economist who has spent much of her life working with institutions like the IMF, the World Bank and the Bank of England. It is possible Shafik was chosen because she has in the past talked about the need to introduce a wealth tax.
On the taxation front there has been over the last year the emergence of a political movement to increase taxation on the rich led by an ex-bond trader, Gary Stevenson. His YouTube video podcasts will typically have 500,000 views. Starmer and the Labour Party generally feel the need to respond to this growing movement that wants to tax the rich. One suspects that the appointment of Shafik as Starmer’s economic adviser is a first tentative move in that direction. It will be interesting to see how the matter of taxing the rich plays out at the Labour Party Conference in a few weeks’ time.
In the election manifesto, Reeves committed Labour to not increasing taxes on working people. It was a foolish commitment. Reeves should have used the £22 billion difference between spending and taxation promise of the previous Conservative administration as an excuse to rid herself of that commitment. But Reeves is not politically adept. Starmer is beginning to realize that.
Another interesting shuffle is the advancement of Torsten Bell to a more senior role. He will be helping draft the budget. One has the impression that Bell is not a great supporter of fiscal rules. Bell previously ran a left wing think tank called the Resolution Foundation. This foundation produced a big report some years back which said the road to growth in the UK lay in the service sector and not in a return to the manufacturing sector. It will be interesting to see if this feeds into the 2025 budget.
Either way, the writing is on the wall for Reeves. If she does not produce a budget that improves Labour’s poll ratings, she will be replaced. That replacement may well be Torsten Bell.
Labour Affairs 
It’s a shame you didn’t put a reference to the financial reality promoted by Modern Monetary Theory and the nonsense of ‘taxpayers’ money’ in this short post. BW, JT
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It’s a fair point. There is no evidence that any of those involved in the reshuffle, Darren Jones, Minouche Shafik and Torsten Bell understand the implications of the fact that the UK is a currency creating state.
As Berkeley, Tye and Wilson make clear in their detailed account of the UK Exchequer:
“Once Parliament has authorised Supply there is no mechanism within the UK monetary system to stop that spending happening. The Bank has no power to refuse and there is no legal mechanism by which a balance has to be checked for available funds. The Bank accommodates the expenditure by balance sheet expansion … Parliament effectively legislates money into existence.” An Accounting Model of the UK Exchequer, Andrew Berkeley, Richard Tye & Neil Wilson p116.
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