Rachel Reeves distances herself from New Labour economic track record

Rachel Reeves has sought to distance herself from New Labour’s economic track record, criticising her predecessors for falling short of addressing some of Britain’s biggest weaknesses.

The shadow chancellor said Tony Blair, the former prime minister, had failed to sufficiently regulate the financial sector and had let globalisation increase inequality.

Speaking at the Bayes Business School in the City of London on Tuesday evening, Ms Reeves said that although Sir Tony oversaw a decade of sustained economic growth and stability, his economic policies were built on “narrow principles” that brought problems further down the line.

New Labour came to power with a landslide victory in 1997, but by the time the Tories took over in 2010 Britain was reeling from the global financial crisis.

Ms Reeves said: “An under-regulated financial sector could generate immense wealth but posed profound structural risks too. And globalisation and new technologies could widen as well as diminish inequality, disempower people as much as liberate them, displace as well as create good work.”

Although New Labour increased economic security through a new minimum wage, Mr Blair and Gordon Brown, his chancellor, failed to properly address weak productivity and regional inequality, Ms Reeves said, adding that the problems “persisted, and so too did the festering gap between large parts of the country and Westminster politics”.

The shortfalls in economic planning were laid bare by the credit crunch, she added, saying: “The ‘great moderation’ could not last, and as the global financial crisis unfolded these weaknesses were exposed.”

Her comments after she attracted criticism from the Labour Left after likening the challenges awaiting the next government to those faced by Margaret Thatcher.

The shadow chancellor argued that Britain faced a “1979 moment” – a reference to the year Thatcher took office, but Left-wing activists from within her party demanded a “true break with Thatcherism” .

She has promised to “hard-wire” economic growth into future fiscal events by giving the Treasury’s Enterprise and Growth Unit a greater role in developing policies, while making it clear she and Sir Keir Starmer have abandoned the economic outlook of Jeremy Corbyn.

Martin Abrams, a spokesman for Momentum, the Left-wing campaign group, said: “Once again, the Labour leadership is proving itself out of touch with the Labour movement and Labour values.

“Thatcher’s government did not bring about ‘national renewal’ but instead misery for millions of working-class people and ballooning inequality.

“As we witness today the exhaustion of a Tory ideology based on privatisation and financialisation, Labour should be offering a true break with Thatcherism, with a popular programme based on public ownership, state investment and wealth taxes.”

Richard Leonard, the Scottish Labour SNP MP for Central Scotland, accused the party’s national leadership of the “rewriting of history”.

“In the 1980s, manufacturing was butchered, factory after factory closed, privatisation was let rip, unemployment rocketed, profits boomed, the wage share fell, the rich got richer and inequality soared,” said Mr Leonard. “No rewriting of history. Thatcher didn’t renew the economy, she broke it.”

The backlash came despite Ms Reeves having rejected Thatcherism elsewhere in her speech by promising an approach that was “unlike the 1980s” and instead arguing that “growth in the years to come must be broad-based, inclusive and resilient”.

Unite, Britain’s second-largest union, which has given Labour millions of pounds in recent years, accused Ms Reeves of pandering to “phoney fiscal rules” and warned she would “end up in a straitjacket of your own making”.

Sarah Graham, the general secretary of Unite, said: “Only sustained long-term public investment in our crumbling infrastructure can turn the tide on decline. It’s time Labour came up with a plan for the real economy rather than the big business lobby.”

Sir Keir prompted a similar backlash among the Labour Left following an article for The Telegraph in December in which he heaped praise on Thatcher for effecting “meaningful change” as part of an attempt to woo Tory voters.