Rarely can an encouraging first estimate of quarterly GDP – up by an unexpected 0.6 per cent, making the UK the fastest-growing G7 nation – have had a greater political impact than when the chancellor seized on it to bludgeon her panicky, confused, rebellious colleagues into sanity.
Bolting out of No 11 Downing Street, the recently camera-shy Rachel Reeves declared to semi-startled reporters that the impending Labour leadership election risked “plunging the country into chaos at a time when there is conflict in the world, but also at a time when our plan to grow the economy is starting to bear fruit”.
This time, the journalists had no need to bellow their questions at deaf ears from 50 yards.
Ms Reeves is right – but recent spikes in the cost of government borrowing have also highlighted, to even the most recalcitrant of Labour MPs, the parlous state of the public finances, and the even more ruinous consequences that would follow a soft-left takeover of the party leadership.
This is another argument that the chancellor used to great effect when she canvassed her backbenchers. And it is not only the Treasury, and British taxpayers, present and future, who will have to pay the bills, but businesses and mortgage-holders, who will see their own cost of borrowing spiral as a result of the market backlash.
It summons up the spectre of another Liz Truss mini-Budget experience, where interest rates start to rise because unfunded borrowing – this time, for public spending rather than tax cuts – points to sharply higher inflation. The very thing that Labour condemned and pledged so solemnly never to repeat would be inflicted on the British people again.
As we saw with the Conservatives in 2022, whatever reputation for fiscal stability the Labour government retains would be shredded like a ripe lettuce.
In his resignation letter, Wes Streeting said he had “no confidence” in the prime minister. But it also turns out that not enough colleagues have sufficient confidence in him to back his leadership bid. In turn, he plainly lacked the confidence that he could beat Angela Rayner, who would have stood for leader had Mr Streeting triggered a contest. It is a sad denouement for Mr Streeting, the best communicator on either of the front benches.
Successive Labour figures have in recent days dismissed investors in the bond markets as cheeky upstarts who will have to “fall in line”, in the phrase of one pitifully naive backbencher, with the parliamentary Labour Party. Diane Abbott, reacting to gilt yields breaking the 5 per cent barrier, remarked that if the government had to take account of such movements then MPs might as well “pack up and go home” – without a hint of irony about what a good idea that might be.
Andy Burnham, the frontrunner to succeed Sir Keir Starmer in any leadership election, once complained that he didn’t see why the government needed to be “in hock to the bond markets”. There are, in fact, 3 trillion answers to that query – one for every pound of the UK national debt.
Despite all the crying about Ms Reeves following a policy of punishing austerity, Britain will borrow another £100bn this financial year. A country that relies on the kindness of strangers to support itself is in no position to tell them to get lost.
None of the putative leadership contenders have any credible answers to the economic challenges the nation faces. That much has, at least, become clear in this chaotic Labour leadership-election-that-never-was.
It is time for this nightmare to end. It has distracted the government and distressed the people for too long – and to zero benefit.
Although there are still some more potential plot twists, the crisis seems to be passing. In summary: Mr Streeting doesn’t have the numbers; Mr Burnham has yet to be selected to represent Labour in the Makerfield by-election, in which he will have to beat a rampant Reform vote; and it is still a little too soon for Ms Rayner, who has been found to have underpaid tax, but not broken the law, by HM Revenue and Customs.
By the sound of her most recent interview, she doesn’t have the appetite to go head to head with the prime minister, even if she’d win among the membership. It would be bruising, and all she would inherit is a broken party and a paralysed government. Her rehabilitation should see her return to government before long.
So this has been a week that shook the Labour government in a way no one could have imagined on that bright, confident morning in July 2024. The nation fully expected the new government to “tread more lightly on their lives”, as Sir Keir put it; to end the chaos and confusion; and above all, to deliver stability – political and economic.
Some demons seem to have been unleashed in the aftermath of the catastrophic local election results – but somehow, as if possessed by evil spirits, the Labour Party contrived to turn the mother of all protest votes into a political omnishambles.
Strange to say, Sir Keir’s defiance and determination in the face of such sustained, intense, ugly pressure has made him look rather less weak than his critics paint him, and perhaps turned some of the sympathy many will have felt towards him into a new respect. He’s certainly seen off his rivals.
At any rate, what’s left of the government needs to get behind the prime minister and back to work. In an outcome nobody expected, Sir Keir’s show of resolve may have made him appear stronger – and more resolute.
