Rachel Reeves does not have many supporters left. The bond markets don’t think much of the Chancellor. Business groups have rubbished her policies, and so have many of the UK’s largest companies. Meanwhile, Labour backbenchers are furious about both the chaos over the winter fuel allowance and the cuts to the welfare budget. Now, it looks as if the Bank of England may have turned on her as well, if comments from the Bank’s governor are anything to go on.

We might expect Andrew Bailey to avoid any direct criticism of the Chancellor. After all, she is his boss. What’s more, a public split between the UK’s two most important financial officials would be deeply damaging, especially given the vast amounts of money the UK has to borrow on the global markets every year. Even so, speaking to the House of Lords economic affair committee yesterday, he sounded a lot more critical than usual.

The obsession with the ‘fiscal rules’, Bailey argued, risked turning into a distraction, with too much emphasis on a single number, and not enough attention paid to the country’s longer-term fiscal challenges. Even more seriously, he argued that the steep rise in National Insurance was starting to destroy jobs. ‘We are starting to see a softening of the labour market, and that is the message I get when I go around the country talking to firms,’ he said.

These are hardly minor points. The ‘fiscal rules’ are a centrepiece of Reeves’s plans, designed to create a framework of stability that will encourage investment and boost growth. And the NI rise was meant to stabilise the public finances, as well as raise the extra money needed for investment in public services and new industries. If they are the wrong policies, then Reeves’s entire economic strategy starts to fall apart.

In reality, it is not hard to work out what is going on here. Just about everybody, except possibly Reeves herself, can see that the British economy is heading into big trouble. Reeves’s first Budget killed off growth, spending is spiralling out of control, and borrowing is soaring.

In the autumn, the Chancellor will be forced into another big round of tax increases, and that will plunge the economy into a full-blown recession. There may well be a gilts crisis as well if the markets lose faith in the Labour government’s ability to balance the books. The Bank is quite rightly trying to avoid the blame for that – and the only way it can do that is by putting as much distance between the governor and the Chancellor as possible.

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