Shadow chancellor Rachel Reeves: ‘It’s not government that creates jobs’

Britain has never had a female chancellor of the exchequer, but that will change next year if the Labour party wins the next general election.

In this scenario, it would be Rachel Reeves walking through the doors of the Treasury and taking charge of all fiscal and economic decisions for an incoming government. For now, she is walking through the entrance to Bettys Café Tea Rooms, a Yorkshire institution in the genteel spa town of Harrogate. 

It would be hard to imagine a more old-fashioned restaurant. Indeed, it’s the kind of place you might pick if you were — for example — trying to reassure the world of your solid, non-revolutionary beliefs.

Wearing a dress in Labour’s ruby red, the shadow chancellor joins me at a circular table amid the art deco glamour of Bettys’ subterranean Spindler Room, which is adorned with numerous stained-wood “marquetry pictures”.

All eyes are on the Tory conference in Manchester, on the other side of the Pennine hills, but Reeves has been busy preparing her 25-minute speech for Labour’s own gathering, which begins this weekend in Liverpool. 

Both parties claim the other would cause economic chaos. “The message for the next election is the risk of five more Conservative years of chaos and instability, not knowing that what you vote for is what you’re going to get,” she says. “Or you could have a changed Labour party with stability at its core.”

Reeves is half of a tight-knit duo at the helm of Britain’s main opposition party with leader Keir Starmer. “Our natural tendency is to collaborate and work together, but also we’ve been in opposition for 13 years and are not going to let anything get in the way of victory,” she says in her south London accent. “Arguments and disagreements and briefing against each other’s teams would be a sure-fire way to lose another election.”

Reeves, MP for Leeds West, chose Bettys as a fun destination not far from her constituency where she sometimes takes her family for a treat. By coincidence I was born a mile away.

She orders a cup of Earl Grey tea with a dash of lemon. Not everyone is a fan of this bergamot-flavoured beverage but she adores it. For her hen-night quiz years ago, her then fiancé was asked to describe her in three words and replied: “Earl. Grey. Tea.”

Waitresses in aprons bustle past serving a tempting array of cakes. The Bettys menu is an eccentric hybrid of Swiss and Yorkshire cuisine — the origin story involves a young Swiss confectioner called Fritz Bützer travelling to England a century ago. The dessert menu, for example, features Yorkshire curd tart nestling between Swiss chocolate torte and “Carrot Gugelhupf”.

We had planned to have a cream tea but switch to a hot lunch. Both of us initially order smoked haddock and leek rösti fishcake topped with a poached egg. On realising this, she switches her order to chicken schnitzel pan-fried in breadcrumbs and Gruyère cheese with “pommes allumettes”, aka chips.

Reeves is now one of the most sought-after politicians in Britain, with business leaders beating a path to her door. Yet she has somehow found the time to write a new book, on female economists — some of them largely overlooked — called The Women Who Made Modern Economics. “I wrote a lot of it on holiday in north Wales,” she says.

In it she gives a potted history of leading figures from Beatrice Webb to Christine Lagarde and — her favourite — Janet Yellen, the US Treasury secretary, whom she recently met in Washington. These are interlaced with parti pris observations by Reeves about British politics, her own journey and Labour.

Reeves studied at New College, Oxford, and London School of Economics before working as an economist at the Bank of England, the British embassy in Washington and HBOS bank. I ask her if most of her friends are intellectuals and she laughs. “Do you want me to call them and ask, ‘Are you an intellectual?’” 

The shadow chancellor likes to play up her wonkish tendencies, noting that she spent one Valentine’s Day evening with her civil servant husband watching a BBC Newsnight special on the Swedish banking crisis.

She is partial to a glass of Malbec, but today is not going to be a boozy session. I say a glass of wine is good for loosening up interviewees. “That’s why I’m having a cup of tea,” she replies.

Reeves claims to be unimpressed by the current Tory prime minister. Yet she is far from complacent about Labour’s 16-point poll lead. “We are against an opponent that expects to win, usually wins, and it’s not easy,” she says. “Even in my Labour constituency there was a very big swing to the Conservatives in 2019 because people would say ‘I’m voting Boris’ — it was disheartening. Back then, even people voting Labour did so with no enthusiasm. That has really changed.”

She tells the story of campaigning in the local elections in Stoke-on-Trent this summer and meeting a “bloke” who had made a song about voting Labour.

This sounds too good to be true. “How did the tune go?” “I don’t know.” “Are you making this up, Rachel?” “I’m not making it up.” Her belly laughter fills the restaurant. I point out that “Labour” doesn’t rhyme with much. “Maybe it wasn’t a rhyming song,” she deadpans.

She admits much of Labour’s poll lead is down to public anger at the Tories rather than a newfound love of her party. “I want people to positively vote Labour, but I think the first thing that happens is they get sick and tired of the current lot and come looking at the alternatives. People have had enough.”

The food arrives. My haddock and leek rösti fishcakes are tasty enough, with a crisp shell and a wonderfully flaky texture, alongside cherry tomatoes, pickled onion and pea shoots.

Reeves has come to our lunch in Harrogate by train. “Is that because you despise motorists?” I ask. Ministers in the Conservative government last week claimed that Labour “vilified” Britain’s hard-pressed drivers — a jibe stemming from the backlash against London mayor Sadiq Khan’s ultra-low emission zone (Ulez). 

“Maybe I should have come here by helicopter,” she replies, in a dig at prime minister Rishi Sunak, who seems to travel everywhere by air. “That whole idea that Labour hates drivers is ludicrous.”

In London she relies on public transport, she says, but in her constituency she gets around in a car, a Kia e-Niro. “My kids think it’s named after Keir,” she says.

Reeves admits that the Ulez in London is “not popular” but praises Khan for extending a scrappage scheme for people replacing their cars. “Sunak thinks the message coming out of Uxbridge was about green stuff, but it was actually about the cost of living,” she says, referring to this July’s west London by-election won by the Conservatives. “Everything we do should be about trying to make people better off, not worse off.”

Instead of targeted taxes on households, Labour wants to use the government’s borrowing powers to push green investment. One of the party’s biggest policies is a debt-funded “green prosperity plan” loosely modelled on US president Joe Biden’s Inflation Reduction Act, although its scope was recently reined in by Reeves amid rising interest rates.

“I’m so frustrated that the government is not doing that here . . . we could be global leaders in carbon capture and green hydrogen, floating offshore wind and so on,” she says.

After her election to parliament in 2010, Reeves was seen as one of Labour’s bright new hopes and was propelled into the shadow cabinet under then leader Ed Miliband. But after 2015, as the party lurched to the left under Jeremy Corbyn, she refused to serve on the front benches. At the mention of John McDonnell, shadow chancellor during the Corbyn years, she emits a low groan.

Did she ever consider leaving the party, like her then political ally Chuka Umunna, who co-founded the unsuccessful Change UK breakaway group? 

“The only time I had doubts was when I watched the [2019 BBC] Panorama programme about antisemitism in the Labour party, which really did shake me and upset me a lot . . . and I did a lot of soul-searching then,” she says. “It was a horrible time. There were a lot of people in my constituency, members, who did not want me to be their MP . . . I spent a lot of 2019 fighting off deselection attempts.”

But she looked at the far-from-successful history of the Social Democratic party, which split off from Labour in the 1980s. “Chuka was once asked, ‘Why didn’t you ask Rachel?’ and he said, ‘Rachel is too Labour’, which I took as a compliment,” she says.

But although Reeves is tribal Labour, she has friends across the political divide. Some Labour MPs have been photographed in T-shirts emblazoned with “Never Kissed a Tory”. But she finds that odd. “When I was a student I didn’t go around voter ID-ing people. I find all that stuff a bit bizarre.”

During what she calls the “wilderness years” of Corbyn’s leadership she chaired the business select committee — overseeing inquiries into various corporate failures, such as construction group Carillion. Only when Starmer won the leadership in 2020, after the party’s disastrous 2019 general election performance, did she find herself back on the front line of politics. 

The Starmer-era party looks very different to the Corbyn manifestation and has binned many radical policies, including most of its mass nationalisations, an £80bn tax-and-spend spree and the enforced seizure of £300bn of shares. Reeves said she took a “pragmatic” view that most of the nationalisations did not make financial sense.

But Labour’s manifesto would still mark a significant shift to the left for the British state, with a more active industrial policy, a raft of pro-worker changes to employment law and the scrapping of the House of Lords. When I say this sounds like the Miliband manifesto from 2015, she tries to change the subject. “Well . . . we are a centre-left party, aren’t we? But you can see the focus we’ve put on bringing business back to Labour.”

I remind Reeves about a speech she gave five years ago calling for a £20bn-a-year wealth tax. Now, by contrast, she has ruled out any such move. “We now have the highest tax burden for 70 years, 25 tax rises since the Conservatives came to office, and I don’t think that more taxes is the way to create greater prosperity. I’m firmly of the belief that we have to grow our way there,” she says, fixing me with a stare. 

I ask if she is a Blairite: “If you’d read the book you’d know that I say that women shouldn’t have to define themselves by men, so I won’t define myself by two former leaders of the Labour party.”

In that case, which female Labour politician has inspired her: “Ellen Wilkinson, amazing woman, second woman to serve in the cabinet — as [Attlee’s] education secretary — raised the school leaving age.”

She takes a couple of photos of her meal, which may or may not go on her Instagram feed. She’s a keen cook, and shows me some delicious-looking photos on her iPhone of a steak dish and some garlic mushrooms with parsley. 

Dipping a French fry in her tomato ketchup, she admits that her name recognition could be higher. But it did spike a year ago during the mayfly premiership of Liz Truss. The market fallout from Truss’s so-called mini-Budget, spiking mortgage rates and her subsequent resignation were a gift to the Labour party, if not to the public. 

But Reeves is careful to say that she was not “crowing” about that disastrous mini-episode in British political history. Some 1.5mn people will be coming off fixed-rate deals in 2024 and going on to more expensive deals, she points out. “Like most people I’ve got a mortgage, so I don’t particularly relish the extra payments I’ll be making from the spring of next year . . . several hundred pounds a month,” she says. 

Part of the Starmer overhaul has been to bin the Corbyn-era Marxist rhetoric and reach out to business leaders. Reeves’s core argument at next week’s conference will be that the government needs to boost economic growth and wealth creation. “There’s no substitute for business investment, business innovation — it’s not government that creates jobs in towns and cities across the UK,” she says. 

Our waitress offers dessert. Reeves orders a scone and jam while I order the Yorkshire curd tart.

The big political story in recent weeks has been the saga of Sunak drawing up plans to cut England’s HS2 high-speed rail line in half by axing the northern Birmingham-to-Manchester leg. Labour could now find itself in the awkward situation of supporting the Tory cuts, Reeves concedes.

“First of all, we would highlight what an absolute joke this lot are, that they’ve spent tens of billions of pounds on a line that goes from Birmingham to London,” she says, spreading the jam on the scone. 

But she hints that Labour will not go into the general election promising to reinstate the northern leg of the line. Fiscal responsibility is one of her mantras.

“I’ve said there will be nothing in our manifesto that will not be fully costed and fully funded. If the government has blown a hole in this budget, I can’t say I can wave a magic wand and right all the wrongs that they’ve done,” she says. “But it would be incredibly frustrating for me.”

Is her obsession with public finances strangling Labour’s ability to sell a positive vision of change? “The problem is, what people really want to hear is that we’ll be able to change things, but if we said we’d decided to spend all this money, they wouldn’t believe it is going to work because it won’t add up. Last summer, Liz Truss dismissed ‘abacus economics’, but I believe that being able to add up is quite an important skill.”

As the waitress clears away our puddings, I ask Reeves, who was a gifted chess player in her youth, whether she plays against her children.

“I tell them, ‘Do you want me to let you win or do you want to play properly?’ And they say, ‘Let’s play properly,’ and I start winning and they get annoyed,” she says. “My father would never let me win at chess, so when I did beat him he was really, really proud. I was about eight. He wasn’t great but wasn’t going to indulge me by deliberately losing.”

Reeves competed at county level, and even became the British under-14 girls champion, though she never considered going professional. She tells the story of playing grandmaster and former world champion Garry Kasparov in her parliamentary office and being thrashed in under 10 minutes.

She loved The Queen’s Gambit, the Netflix show in which a young female chess genius destroys a series of arrogant male competitors. She recalls being at a chess tournament when she was about eight years old. 

“It was in a school and I was playing a little boy. His friend came over and said, ‘Lucky you, you’re playing a girl,’” she recalls. “After I beat him I thought, you won’t be saying that again.”

Jim Pickard is the FT’s deputy political editor

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