What Rachel Reeves learnt from witnessing the global financial crisis unfold in Halifax
Shadow Chancellor Rachel Reeves tells Chris Burn about a political career in Opposition, how Labour can win, and watching the financial crisis unfold first-hand in Yorkshire.
As the second anniversary of Labour’s worst General Election defeat since 1935 arrives this weekend, Shadow Chancellor Rachel Reeves is reflecting on a political career that to date has been spent entirely in Opposition.
Having left the world of finance behind to become a politician, Ms Reeves was just 31 when she became the Leeds West MP in the 2010 General Election – a moment of personal celebration but coinciding with the start of an extended exile from government for the Labour Party.
“It’s been 11-and-a-half years now, I want to be part of a Labour government and there are times when you think: ‘Am I actually changing anything?’,” said Ms Reeves when asked if she had any regrets about her career change as she attends the Christmas lights switch-on at the Kirkstall Forge development in her constituency.
“There are lots of thing in Leeds I can look to and say: ‘I played a part in that’ - like this place. Kirkstall Forge has the first new train station in Leeds for 30 years. That’s fantastic.
"But there are times when you think: ‘Have I lifted people out of poverty?’ No – poverty has gone up in the 11 years I’ve been an MP. Have class sizes reduced which is one of the things I’m passionate about? No – class sizes are on the increase. I can help people at surgeries who are suffering with antisocial behaviour or on housing waiting lists, but you can’t make the sort of systemic big changes that are needed to transform people’s lives.
“There have been times in the last 11-and-a-half years when you think, ‘Could I have made more of a difference doing something else?’ but in the end it is politics I love. Although I haven’t been able to do so far, I believe being in politics is a chance to change people’s lives.”
The daughter of two primary school teachers in London, Ms Reeves joined Labour at the age of 17 in 1996 inspired by Tony Blair’s ‘education, education, education’ mantra.
“My mum was a special needs teacher at my primary school and budgets for special needs teaching was cut. She became a classroom teacher but the kids she had been supporting and needed extra support were no longer getting it,” she says.
“That put pressure on everyone at the school, particularly those with additional needs.
“At my secondary school, our sixth-form was a couple of prefab huts in the playground, our library had to be turned into a classroom because they were more kids than there was space in school and there were never enough textbooks to go around.
“I felt very strongly that the Conservative Government just didn’t care very much about schools like mine and communities like mine. For me, doing something about it was joining the Labour party and obviously Tony Blair was speaking about ‘Education, education, education’ and that really chimed with my experience at school but also my mum and dad’s experiences as primary school teachers.”
She had just turned 18 when the 1997 General Election took place and took a day off school to campaign in what turned out to be a landslide Labour victory.
“I felt like things were going to change and they did. My school was rebuilt and refurbished and so were all the schools in Leeds West. The New Labour Government invested in public services and transformed lives.”
Politics has gone on to become a family affair - her younger sister Ellie became Labour MP for Lewisham West and Penge in 2017.
From Oxford to the Bank of England and the US
Ms Reeves, a teenage chess champion, went on to gain a place at Oxford University to study Philosophy, Politics and Economics.
“When I was in Year 11, our headteacher did a special assembly where she said two girls from our school are at Oxford today doing their interviews and no one from our school has ever applied or gone to Oxford or Cambridge before.
“I remember their names and the assembly and I thought, ‘Maybe I could do that’. It hadn’t ever really occurred to me - my mum and dad had gone to teacher training college but they didn’t have university degrees.
“One of them got in and then two years later, when I decided to apply and I just applied for the college this other girl had gone to. I saw her when I went up for the interview and said, ‘I’m only here because of you!’”
At Oxford, she discovered a particular passion for Economics and went on to get a job at the Bank of England where her first boss was Andrew Bailey, now BoE Governor.
Her job was focusing on analysing international economies and she was tasked with looking at the Japanese system as it was trying to come out of what had been dubbed a ‘Lost Decade’ of economic stagnation in the 1990s.
“I must say I knew absolutely nothing about the Japanese economy when I arrived at the Bank. But it was a time when they were experimenting with zero interest rate policies and quantitative easing. It all seemed so remote from normal economic policy but it turned out to be a pretty good grounding from what happened in the UK a few years after.”
In the wake of 9/11, she was also seconded to the British Embassy in Washington to report back on economic developments in the US economy.
“Their economy was going through a really difficult time. America was experimenting with different policies to get people to spend but a lot of the airline companies were going under. People were very nervous so consumer spending was falling, investment decisions were being put off.
“What happens in the US has a big influence on the UK economy so they wanted more capacity out there. I reported back to the Bank, the Treasury and the FSA as it is now.”
But while she was working in finance, Ms Reeves continued to develop her political ambitions and stood twice as the Labour candidate in the safe Tory seat of Bromley and Chislehurst.
“I sort of regard it as my apprenticeship - I wanted to know whether it was something I might want to do.”
Witnessing the impact of the financial crisis in Yorkshire
In 2006, she moved to Yorkshire after getting a job at Halifax Bank of Scotland (HBOS) on the retail mortgages team. The job was based in Halifax but Ms Reeves opted to move to Leeds and commute to the town.
“At the time they were trying to change the market so people weren’t switching every two or five years but had long-term mortgages. To be honest, it was not something we succeeded in doing in part because of quarterly reporting and quarterly profits.
“To make big changes in markets you need longer. I do think the way our corporate governance works and the way profit reporting works sometimes discourages businesses from long-term investment decisions and changes in the business model.
"If you can’t show results in three months or six months, then your share price tumbles and everyone wants a different strategy. So you end up sort of sticking with what you do rather than actually trying to make the change in the market needs that would be better for consumers.”
Not long after her arrival, the global financial crisis began to bite as the sub-prime mortgage crisis spread across the world.
“One of the challenges that HBOS was finding with the Halifax mortgage brand was they were losing market share to smaller companies.
“There were self-certification mortgages, a lot of buy to let and subprime.
“There was a pressure to do some more of this and I didn’t think that was the right approach.
“There was a lot of pressure because Halifax was the biggest mortgage lender in the country but was actually quite rapidly losing market share to smaller companies who were taking more risks.
“HBOS wasn’t free from its own problems, mainly in corporate lending and commercial property lending.”
She says the collapse of Northern Rock, which began in September 2007 before the bank was nationalised in February 2008, began to make it clear that the sector was facing an existential crisis.
“Really by Christmas it was pretty clear the writing was on the wall for HBOS as well. Basically, you knew what order they were going to go – so Northern Rock fell, then Bradford & Bingley, then Alliance & Leicester, but it was obvious we were next.”
HBOS was acquired by Lloyds Banking Group in January 2009 and it subsequently emerged the company had been given a secret Bank of England lifeline worth tens of billions during the 2008 crisis to keep it afloat.
Ms Reeves says her experience of the time reinforced her belief in the vital importance of maintaining economic stability.
“It is incredibly important. When economies tumble, it is those on the lowest incomes who suffer most. Some people lost their jobs but also their sense of pride.
“A lot of people had worked there all their lives and a lot of people had all their family working there. If someone asked what did you do and you said ‘I work for the Halifax’, you said it with a real sense of pride. And then suddenly people just felt ashamed. You said you worked for Halifax and people were like, ‘Oh right, you’ve just crashed the economy’.
“There is still a Halifax bank but it is now part of a London-headquartered bank. Halifax is doing incredibly well with things like the regeneration of The Piece Hall, but I don’t think it is quite the same as having a bank headquarters in your town.”
Labour's uphill challenge
Ms Reeves describes her politics as being “on the centre-left”, and adds: “I’m a social democrat, my passions really are education and economic stability – creating good jobs and opportunities for people across the country and ensuring when the tide rises, it lifts all boats. Too often, you get economic growth that makes the rich richer and doesn’t help the people in the middle or at the bottom.”
Ms Reeves is under no illusion that the party has a vast amount of work to do to overturn the Tories’ majority.
“I’m absolutely focused on Labour winning. Labour is not a pressure group, we were formed to be a party of Government and to change things. We’ve got stop focusing inwards and look out to the country and people we want to serve.
“We will never change anyone’s lives from Opposition. To get to Government you have to persuade more people to vote for you.
“I didn’t come into politics to make speeches, to come up with good amendments in debates or to ‘win the argument’. I came into politics to make a difference and I think Labour have got to be honest, how often have we made a difference? Not often enough.
“How many times do Labour have to be defeated before we say, we need to get our act together here and we need to start listening to voters. Actually when we did do those things in 1997 we achieved a lot.
“I don’t see the point of being in politics to come second.
“When Keir became leader he knew he had a mountain to climb. We’re absolutely moving in the right direction. We were 12 percentage points behind at the last election, we are now neck and neck in the polls. We have come a long way but we’ve got more to do to rebuild that trust with the voters who have left us in the last few elections.
“The only way we’re going to get them by listening to the voters and offering ambitious but funded spending commitments and showing the Labour Party has changed. We’re moving in that direction, but there’s more work to do over the next year or two.”
Pride at work with Women's Aid
Rachel Reeves says one of her proudest achievements is being patron of Leeds Women’s Aid and being in a position to highlight the work which the organisation does.
The charity helps protect women and families affected by domestic violence and abuse.
“It is their 50th anniversary next year and I’ve been a patron for 10 years,” she says.
“They have done brilliant stuff during the pandemic. With people being trapped in at home during lockdowns, they couldn’t easily pick up the phone, so they introduced this online chat system to provide advice and support.
“Demand has gone up massively.
“I’m really proud to be able to support them and work with them.”