Barely six months after the UK general election, Chancellor Rachel Reeves' political opponents are calling for her to resign. Former prime minster Boris Johnson cast one of the first stones with a post on X about "Rachel from accounts".
Author
- Despina Alexiadou
Reader at the School of Government and Public Policy, University of Strathclyde
Reeves has undoubtedly faced unwelcome headlines about high UK borrowing costs and a flatlining economy . But nonetheless, this could appear as a particularly harsh treatment of a relatively new chancellor. (It could also be sexism.) But how common is it for finance ministers to resign or be sacked early on in the government's term?
A global study of 2,976 finance ministers over a period of 45 years found that, as you might expect, economic performance tends to affect their tenure in office. Low economic growth is associated with shorter tenures.
So when the economy is performing poorly, finance ministers are more likely to either resign or be removed by the prime minister or president. But is this what is happening right now with Reeves?
I think it is not. On average, British finance ministers that are appointed at the start of the government will stay in office for about four years (which typically coincides with the duration of Westminster governments).
Those appointed during a reshuffle will stay for just over 2.5 years (based on my own data from 1945 to 2015). There have been instances when chancellors either resigned or were asked to resign, but these are quite rare. Nadhim Zahawi stayed in office for two months and Kwasi Kwarteng had the shortest tenure recorded at just over a month (if we exclude Conservative chancellor Ian Macleod, who died a month after he was appointed in 1970).
But these are exceptional cases during exceptionally turbulent times with high levels of government instability and frequent changes in the political leadership due to Brexit.
The next factor that could potentially qualify an early dismissal or resignation from office is the current economic situation. But Britain is in no worse an economic place than it was in July, when the cabinet was put together by incoming prime minister Keir Starmer.
The December annual inflation rate was slightly up to 2.5% from 2.2% in July but this a small detail compared to the inflation rate of 11% in 2022 . And the FTSE 100, the index of the largest 100 companies on the London Stock Exchange, recently hit an all-time high , while borrowing costs also dipped back - signalling some better news for Reeves.
The opposition and certain media outlets have called for the chancellor's resignation because growth was lower than expected and the government's cost of borrowing (the yield on the ten-year bonds) was up to the highest level since the 2008 financial crisis. In this light, many have questioned her credentials as an economist and, therefore, her ability to lead her department. I think this is hypocritical.
Reeves has a masters in economics, but she does not have to have worked as an economist to be a competent and effective chancellor. In some European countries, like Greece, Portugal or Sweden, a significant percentage of finance ministers have been professional economists. But the UK does not have either this tradition or expectation.
According to my data , none of the chancellors had a career as a professional economist before entering politics. A number of them, such as Norman Lamont and Rishi Sunak however, worked in investment banking.
Moreover, unlike many other European countries, British prime ministers are no more likely to appoint economists or non-partisan experts to the finance portfolio during financial and economic crises. So in this respect, Reeves has just as strong educational and professional credentials as most chancellors. (She studied philosophy, politics and economics at Oxford like many of her colleagues.) And she worked in the banking sector before her election to parliament.
The real reasons behind the crisis
So, why is she perceived as a weak chancellor?
She is not the best communicator. The cut in the winter fuel payment , announced in the summer, cost the government precious political capital with voters and backbenchers, who should otherwise be supportive of October's tax and spend budget.
The £25 billion rise in national insurance on employers came as a surprise to many business leaders, making them less amenable to the government. The rising employers' cost due to this move have been cited as the main reason for low growth prospects since the budget was announced in October.
Yet, the real reason Reeves finds herself in troubled waters is not the budget or her policies. The real problem is that the British economy has been under-performing for almost two decades, with economic growth having declined significantly since the 2008 financial crisis.
She had to raise taxes in October's budget to invest in education, health and infrastructure. The Organisation for Economic Cooperation and Development (OECD) called on Reeves to stop focusing on debt and prioritise investment, because chronic underinvestment was hurting growth. Many think tanks and economists agree with that assessment .
But under-investment is only part of the story. Brexit is the other part that almost no one talks about. Brexit has led to a dramatic fall in trade between the UK and the EU, with imports from the bloc declining by 32% and exports by 27% .
Overall, the UK saw a 10% decline in total goods trade between 2019 and the end of 2023, when the other G7 countries experienced a growth of 5% .
Reeves was appointed to the second-highest political office in the country to signal a radical change of course. She is the first British woman to oversee the country's economy. Women account for only 4% of all finance ministers; and they are primarily appointed during periods of economic distress , such as during major inflationary and banking crises.
Reeves was not appointed during a major economic crisis but a crisis nonetheless, one of low growth and low trust in political institutions. She might have accepted a poisoned chalice and it will take a lot of courage and political skill to survive it. It's certainly in the UK's interests that she succeeds.
Despina Alexiadou does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
