Keir Starmer has ‘full confidence’ in Rachel Reeves despite pressure on the British chancellor
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Sir Keir Starmer has given Chancellor Rachel Reeves his “full confidence” but refused to say whether she will still be in her job at the next election.
Amid falling business confidence, criticism of the October budget and market turmoil, the Prime Minister on Monday refused to answer questions about whether Reeves he would be chancellor for the whole parliament.
“Rachel Reeves is doing a fantastic job – she has my full confidence,” he told a press conference in London. “She has the full confidence of the entire party.”
Reeves, who returned from a visit to China on Monday, is under pressure to show she has a growth strategy after UK economy it stagnated at the end of 2024 with rising inflation.
Prime ministers usually refuse to guarantee any cabinet minister a job for a full parliament, but the Conservatives seized on Starmer’s refusal to answer a question about Reeves’ longevity at the Treasury.
They noted that last November, Starmer’s spokesman appeared to suggest that David Lammy would serve a full term – expected to run to 2029 – as foreign secretary. “Yes, he is the foreign minister,” the spokesman said at the time.
Shadow Chancellor of the Exchequer Gareth Davies said: “The fact that Keir Starmer has repeatedly refused to say whether Rachel Reeves will remain chancellor speaks volumes.”
Meanwhile, Starmer confirmed that ministers will have to be “relentless” in reining in public spending as the government struggles to stay within its own borrowing rules.
“In terms of a ruthless approach when it comes to finance and spending, yes, we will be ruthless,” Starmer said. “We have clear fiscal rules and we will stick to those fiscal rules.”
Recent turmoil in bond markets has pushed up the cost of government borrowing, threatening to derail Reeves’ pledge to balance day-to-day spending with tax receipts in 2029.
The UK’s borrowing costs have risen sharply since the October Budget as a global bond sell-off combines with fears of more borrowing and a stagnating UK economy. They rose further on Monday, with the 10-year bond yield up 0.04 percentage points to 4.87 percent, moving toward a 16-year high set last week. Yields rise when prices fall.
Sterling, which has been caught up in a selloff in gold, lost another 0.4 percent on Monday against the resurgent U.S. dollar, lifting the pound to $1.215 in early afternoon trading and taking its year-to-date losses to more than 2, 8 percent — the worst performance among major world currencies.
Dean Turner, an economist at UBS Wealth Management, said Reeves was under pressure to act because waiting “in the hope that the whole episode will be over” would not be seen as a “credible” response by investors.
The chancellor is awaiting new data this week that will further shed light on the government’s efforts to strengthen the economy.
Official inflation data for December will be released on Wednesday, which is expected to show an annual rise in the consumer price index of 2.6 percent last month, unchanged from November’s reading.
GDP data for November is due next day, with a Reuters poll pointing to a slight increase of 0.2 percent.
Higher-than-budget yields will not only hurt growth prospects, but are likely to add around £12bn to the government’s annual interest costs, according to calculations by Rob Wood of Pantheon Macroeconomics.
If held, they would more than wipe out the chancellor’s entire £9.9bn headroom over her current budget rule, reinforcing calls for the chancellor to take action as soon as March to cut public spending further.
“Reeves will have to tighten the policy in the spring,” he said in a note. “But they are likely to phase in the cuts in spending plans over five years.”
