Reeves will be judged on who she speaks 'for'

If budgets are box office for Chancellors, then the annual Mansion House speech is the economic equivalent of an art-house release, in which the Chancellor can spell out their and economic philosophy in lofty terms.

The measures set out won’t decide the political fate of the government - that will remain tied to the measures in the budget and future spending reviews. But they will shape the economic strategy that underpins them. 

This first Mansion Speech by Rachel Reeves came at a crucial time for the government. The economic outlook remains challenging for the UK and its nearest European partners. The downgrading of growth in the last quarter has meant the UK has dropped off the top of the growth league, and Donald Trump’s win in the US election adds even more uncertainty to trade and the global economy.

As we set out in our post-election analysis, Donald Trump's return presents real questions for the government, particularly the Treasury. Most expect the now President-elect to demand more spending from NATO members, perhaps even above the 2.6% set out by the Chancellor in her budget.

On top of this, trade policy will now be a significant cause of tension within the government. The Treasury and Foreign Office will likely look for ways to navigate relations with the US while not undermining their strategy to improve trade with the EU. The recent meeting between Keir Starmer and President Xi of China was an attempt to go some way in soothing tensions and help support the growth mission, which may prove more difficult with a White House committed to 100% tariffs on a raft of Chinese goods.  

As Professor Morten Ravn makes clear, the Trump administration could pose minimal upside on trade: 

“The Trump administration seems set on using tariffs for protectionist reasons. World Trade Organization (WTO) rules allow for retaliatory tariffs, but actions by individual trade partners may not be much of a deterrence, while trading blocks can exert much more effective deterrence. Moreover, the UK - US trading relationship is very asymmetric - the US is an important export market for UK firms, but the UK is a tiny market for US firms. The cards are firmly stacked against the UK even if the Trump administration should be willing to show some token of goodwill”.

Yet despite these headwinds, Reeves sought to go beyond tax and spend to set out her vision on key areas of economic reforms, which she believes can help Britain meet the government’s ambition of having the fastest sustained growth in the G7.

All entail reform.

Firstly, the speech to city traders and financiers included some important sections on regulation. After the 2008 crisis, UK banks and financial institutions have been given stricter lending rules, including increased regulations around financial instruments. Trailed before the speech, Reeves set out her thinking about how the government would approach regulation.

“The last government introduced legislation to make growth and competitiveness secondary objectives for our regulators which we supported in opposition.

Tonight, I can announce that we have issued new growth-focused remit letters to the Financial Conduct Authority, Prudential Regulation Committee, Monetary Policy Committee, Financial Policy Committee and the Payment Systems Regulator.” 

Underlining what this means in practice, Reeves set out the government's ambition for growth and the need for regulators to be onboard with the mission.

“These make clear that I expect them to fully support this government’s ambitions on economic growth.” Reeves said.

This is welcome, but there will be a need to avoid over-regulation being replaced by an over-correction which puts long-term stability at risk.  As Professor Frederic Malherbe, Co-Head (Research) of the Finance, Accounting and Economics Group in the department for economics, says: 

“The UK is red-tape heavy, and this is certainly something that affects growth. Efforts to decrease the administrative burden of the regulatory process burden are welcome. However, the rhetoric that the regulatorythat regulatory system’s efforts to eliminate risk are holding back the economy isn’t helpful. This is the typical argument that drives the regulatory cycle and leads to too loose regulation after a period in which financial crises have been averted.”

Secondly, on pensions, Reeves set out a series of reforms which build on earlier reforms under the Conservative government on how UK pension funds might look to increase investments with the UK. As set out by our long-time collaborators The Future Governance Forum, countries such as Canada and Australia have pooled public sector ‘mega funds’ - allowing them to invest in infrastructure or utilities, and helping underpin growth. 

As their Director, Nathan Yeowell noted following the speech,

“The decision to encourage consolidation of Defined Contribution (DC) pension schemes into larger so-called ‘mega funds’ should help limit costs across the sector and, crucially, create larger pools of capital to invest in more domestic, productive assets".

“Similarly, the push to fully pool Local Government Pension Scheme (LGPS) investments by spring 2026 should also increase and streamline more expansive investment opportunities. I’m also very pleased with the government’s push for local pension funds to be channelling 5% of their assets into local impact, or infrastructure, projects, allowing for local and regional growth projects alongside potential big-ticket items.”

Clearly, this push for more effective economic tools is essential for long-term investment. Still, it will remain vital for these more high-level strategic interventions to be bridged with voters' everyday concerns. 

It’s worth remembering that in his first Mansion House speech in 1997, Gordon Brown not only spoke of reform, he also embodied his politics. Ditching the white tie favoured by his predecessors, the man of the manse drew sartorial criticism from the City establishment. His aides said his choice of lounge suit was about him wanting to wear “his working clothes”.

A signal to who he spoke for.

Today’s Chancellor will be judged by who she speaks for. As we set out in our post-budget analysis – the real test at the next election will be whether this government was seen to respect and deliver for those living far from the gilded halls of Mansion House.