No. 10's New Finance Guru: The Columbia Controversy

Sir Keir Starmer’s government is facing a fresh wave of criticism over its economic strategy following reports that it has appointed Baroness Minouche Shafik as the Prime Minister’s new chief economic advisor. The move has sparked concern among critics who claim the new hire has "no experience of business," holds "little clout in the markets," and is a strong proponent of wealth taxes. The appointment comes as the UK economy continues to grapple with stagnant growth and the Chancellor, Rachel Reeves, prepares to implement significant tax increases in her upcoming autumn Budget, Daily Dazzling Dawn understands.

Lady Shafik, a former deputy governor of the Bank of England and ex-head of Columbia University, is expected to act as a crucial link between Starmer and Reeves. Her role will be to help navigate the challenging economic landscape as the government seeks to fill a potential £50 billion hole in public finances. The appointment has been met with skepticism from some quarters, particularly from figures like Shadow Business Secretary Andrew Griffith, who derided the choice of an "establishment academic with no experience of business." Griffith argued that any number of British business leaders could have better advised the Prime Minister on the "harsh realities of trying to tax your way to growth."

A History of Tax and Controversy

Baroness Shafik's past work has drawn particular attention. In 2023, she co-chaired a Resolution Foundation inquiry that proposed the abolition of inheritance tax relief on farms and including pension pots within a deceased person's estate. Both of these measures were subsequently adopted by Chancellor Reeves in her first Budget, provoking anger from farmers and savers.

Her background is primarily in academia, civil service, and international finance. She served as Deputy Managing Director of the International Monetary Fund, where she played a key role in the response to the 2009 Eurozone debt crisis. However, her recent career has not been without controversy. She resigned from her role as head of Columbia University amidst widespread criticism of her handling of student protests related to the Israel-Hamas war. Critics, such as former Treasury economist Julian Jessop, have pointed to this incident as evidence of her difficulty "engaging with the challenges of the real world." Jessop also suggested that Shafik appears to be "even keener on wealth taxes and income redistribution" than Reeves and pensions minister Torsten Bell, who was recently promoted to a key role in the Budget preparations.

The Debate Over Economic Direction

The hiring of Lady Shafik underscores the ongoing debate within the UK about the best path to economic recovery. While the government seems to be leaning on a strategy of tax hikes and redistribution, critics argue this approach could stifle growth and deter investment. The focus on academic and policy expertise, as embodied by the appointments of Shafik and Bell, contrasts sharply with the business-first rhetoric of the opposition. The government has so far declined to comment on the appointment, leaving many to speculate on the full extent of Lady Shafik's influence and the direction of the country's economic future. The question remains whether her expertise in international finance and policy will be enough to steer the UK out of its current economic troubles or if her perceived lack of "market clout" will lead to further unc

ertainty.