With her dogmatic and dishonest rhetoric, Rachel Reeves risks shattering her growth agenda, writes ALEX BRUMMER

The Labour Party has seen its mask slip, and the voters who gave Sir Keir Starmer such a generous majority have been confronted with the ugly face of cheap politics: skewed priorities and partisan compromises.

How can a massive £9.4bn payout to state sector unions supporting Labour not be seen as cynical?

And why is a government that promised to rebuild Britain for all its citizens protecting the billions we spend on asylum seekers rather than our own pensioners?

Yet the worst aspect of the hollow political theatre we saw on Monday with Chancellor Rachel Reeves’s “spending audit” barely received a mention: the betrayal of the productivity and prosperity that Britain so desperately needs.

The new government claims its primary mission is to “restore growth” – as it should be. The nation would be delighted if Britain’s first female chancellor were to succeed it.

Miserable

But instead of speaking to the country in a spirit of optimism, Reeves came across as unnecessarily and destructively miserable.

For example, he claimed he had inherited the weakest economy since 1945, which is clearly false. He found a Tory whitewash, when there has been no such thing. As for the stable and expanding economy bequeathed to him by former Tory Chancellor of the Exchequer Jeremy Hunt… not a word.

Reeves has chosen to pretend that the improving economic outlook is a mirage, but as Hunt, now shadow chancellor of the exchequer, has reminded us, Britain returned to growth in the first two quarters of the year. After a difficult period, the economy is recovering.

Just yesterday, Lloyds Bank reported that business confidence had reached a seven-year high. Inflation had returned to the Treasury’s 2% target, a remarkable achievement given the current situation. Government borrowing is on a downward trajectory and UK debt levels (below 100% of national income) are lower than those in the US, Japan, France and Italy.

The tax rises the Conservatives had planned well into the next decade, coupled with Starmer’s election victory, had already provided the stability that City traders (and, in particular, bond markets) so crave.

The public finances are by no means disastrous, but Reeves is obsessed with what she calls “fixing the foundations”. This shows that the new occupant of No 11 is nothing more than a fiscal obsessive who lives in fear of the financial markets, which is why she has chosen to kill key infrastructure projects and hit savers – an attack on two key drivers of future prosperity.

The fake catastrophe “uncovered” by Reeves is simply an excuse to raise taxes still further – taxes which already absorb 37 per cent of national income – in order to buy peace with Labour’s unionist masters.

The risk is that by showing such generosity, especially towards troubled junior doctors, the Chancellor will simply pile on competing demands from other colleagues in the NHS.

One of the most disconcerting things is that Reeves’s dismal audit contradicts the growth promises outlined by the government in its first three weeks.

On his first day at the Treasury, for example, Reeves gathered together senior figures from business and the City to tell them that Labour would make a full-throttle sweep of Britain’s planning system to build 1.2m homes. A new “National Wealth Fund”, designed by former Bank of England governor Mark Carney, would unlock private-sector cash and investment. Ed Miliband’s Big British Energy would create a green industrial revolution.

I now fear that such initiatives will be put on the back burner, thanks to Reeves’ misguided determination to be an Iron Chancellor and be seen as such.

The signs are not encouraging. Key to expanding the British economy, for example, is improving infrastructure so that, among other things, people and goods can move more efficiently.

It is, then, an act of sabotage to cut the very projects that could break Britain’s cycle of weak productivity.

Reeves has decided to cancel several imaginative transport projects, including the controversial but much-needed A303 Stonehenge tunnel, dealing a major blow to the South West’s ailing economy.

A major bypass of the A27, a key route for the valuable port of Southampton, has also been cancelled. Funding has been removed to restore previously derelict and abandoned rail lines.

And there is no mention of what the Government plans to do to connect the section of the HS2 high-speed link to Birmingham from where it currently terminates (a station at Old Oak Common, west London) to the centre of the capital, where people want to go.

If Reeves’ £22bn budget deficit is to be taken seriously, the £5.5bn of cuts for the 2024-25 financial year announced this week, plus the £8.12bn of projected spending reductions for 2025-26 cannot be enough.

Sabotage

The Labour manifesto promised not to raise VAT, income tax or national insurance, but taxes will inevitably rise anyway.

Reeves has already begun consultations on scrapping the remnants of non-domiciled status and is proposing to raise taxes on Britain’s booming private equity industry.

Higher taxes on capital gains and inheritance are also planned, which would hit middle-income households. The Chancellor of the Exchequer is also considering removing some tax relief on pension savings.

Attacks on the rich, who have accumulated wealth as a result of the huge increases in asset prices (property and shares) in recent times, will be popular with Labour’s socialist base.

But how will these policies contribute to growth?

Starmer and Reeves say they want to boost investment in Britain’s glittering artificial intelligence, technology, gaming and life sciences industries and revive the London stock market.

However, taxing the richest in society will only drive capital abroad and make it even harder for the new government to unlock the private sector money it seeks for its green revolution, not to mention the new National Wealth Fund created to finance innovation and pioneering technologies.

There is a potential ray of hope that could come from Reeves’ former employers at the independent Bank of England.

Doubt

Today, the Monetary Policy Committee headed by Governor Andrew Bailey begins a meeting that could cut interest rates from 5.25 percent now that inflation is back under control.

A rate cut would be a boost for struggling businesses, help households with mortgages and reduce the cost of servicing Britain’s national debt. It would be a huge boost for British manufacturing.

But now Reeves has sown seeds of doubt in the City. The concern is that his inflation-beating pay deal for public sector workers will trigger demands from other groups of workers.

A cautious Bank of England, fearful of a “wage spiral”, could backtrack on a very delicate decision. Prolonging a period of higher borrowing costs would, among other things, do immense damage to the Government’s ambitious house-building plans.

Reeves has forgotten that the quickest and best way to deal with excessive borrowing is to expand the economy, which in turn increases Treasury revenues and reduces welfare payments.

The entire growth agenda that the new government was elected on is being crushed by the Chancellor’s dogmatic and dishonest rhetoric.

What is in danger is not repairing the foundations, but turning them into rubble.