Labour MPs Express Concerns Over Rachel Reeves’s Economic Strategy
Labour MPs are increasingly voicing their apprehensions regarding Rachel Reeves’s management of the economy, as reported by The i Paper, following the resignation of International Development Minister Anneliese Dodds. Dodds, marking the fourth senior woman to depart Sir Keir Starmer’s government, cited the government’s cuts to the aid budget that were implemented to boost defence spending as her reason for leaving.
In her discussions with the Prime Minister, Dodds expressed her belief that the current funding strategy for the increased defence budget is unsustainable. She warned that the Chancellor will eventually have to reconsider either the fiscal rules or tax increases. The resignation has sparked concern among party members about the government’s prevailing approach to spending.
Reeves has committed to not borrowing for day-to-day expenses or raising direct taxes. However, as her financial leeway diminishes, she faces the prospect of making cuts in her upcoming March spring statement. In her resignation letter to the PM, Dodds articulated her expectation for discussions about elevating the defence spending target from 2.3% to 2.5% of GDP, alongside considerations for revising fiscal rules and taxation.
Despite mounting pressure, Reeves has remained firm in her stance against altering her fiscal rules to accommodate additional borrowing, all while being urged not to initiate further tax increases. The decision to increase defence spending will be financed by a reduction in the aid budget from 0.5% to 0.3% of GDP, as announced by Keir Starmer on Tuesday.
During a packed one-hour meeting of the parliamentary party on Monday evening, MPs voiced their concerns ahead of the announcement, with only one member reportedly expressing support for the decision. One Labour MP conveyed to The i Paper: “While it may seem straightforward to make spending decisions in theory, the unintended consequences can be dire and long-lasting. Dodds’s letter clearly outlines these risks and should serve as a wake-up call for our future choices.”
Another MP noted that her resignation “rightly highlights the concerns many MPs harbor regarding cuts to the aid budget, especially in a time of escalating global need and instability.” They added, “We have consistently been told that we cannot afford to support our constituents, from winter fuel payments to lifting the two-child cap. Many will be scrutinizing the spring statement to see if any concessions are made regarding welfare support and child poverty.”
Starmer defended his decision, describing it as “difficult and painful,” yet emphasizing that “protecting our national security must always be the foremost duty of any government.” Dodds learned of the plan to draw from the aid budget last Friday. By Monday, after being informed that her budget would be nearly halved overnight, she made the decision to resign from Cabinet, keeping it confidential from even her closest allies to prevent disrupting the PM’s visit to the US, as per The i Paper.
In the days following, Dodds, together with officials from the Foreign, Commonwealth, and Development Office (FCDO), evaluated the potential ramifications of the cuts on ongoing international projects. A source indicated that witnessing the “stark” outcomes for vulnerable populations abroad solidified Dodds’s decision to resign.
On Monday, Starmer announced that development assistance would be reduced from 0.5% to 0.3% of gross national income by 2027 to facilitate an increase in the defence budget to 2.5%. Allies of Dodds asserted that she understands better than No10 the real-life implications of these cuts.
In her letter to the Prime Minister, Dodds warned that the government appears to be emulating the aid cuts of former US President Donald Trump, which would be “deeply damaging” to the UK’s international standing. She cautioned that this move would adversely affect support for countries like Gaza, Sudan, and Ukraine, potentially leading to the UK’s exclusion from multilateral organizations.
Deputy Prime Minister Angela Rayner expressed her regret over Dodds’s resignation but endorsed Starmer’s spending decision. “It is a really difficult decision that was made, but it was absolutely right for the Prime Minister and the Cabinet to support the action to allocate more resources to defence,” she told reporters.
Conservative Party leader Kemi Badenoch also expressed her support for Starmer’s decision. However, Tory MP and former Foreign Office minister Andrew Mitchell commended Dodds for her principled resignation. “Labour’s disgraceful and cynical actions tarnish the party’s reputation as they balance the budget at the expense of the world’s poorest. Shame on them, and kudos to a politician of integrity,” he stated.
The Liberal Democrats welcomed Dodds’s resignation, asserting that the government’s stance on aid spending is “unsustainable.” The Scottish National Party (SNP) has called for a Commons vote concerning the aid spending decision.
