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Sir Keir Starmer declared his “full confidence” in Chancellor Rachel Reeves, but declined to say whether she would remain in office at the next election.
In the wake of declining business confidence, criticism of the October budget and market turmoil, the Prime Minister refused to answer questions on Monday about whether… Reeves He will be an advisor to the entire Parliament.
He said at a press conference in London: “Rachel Reeves is doing a wonderful job, and she has my full confidence.” “She has the full confidence of the entire party.”
Reeves, who returned on Monday from a visit to China, is under pressure to show she has a strategy for growth after the crisis UK economy Recession at the end of 2024 as inflation rises.
Prime Ministers typically refuse to guarantee any minister a job in the full Parliament, but the Conservatives seized on Starmer's refusal to answer a question about Reeves' longevity at the Treasury.
They noted that Starmer's spokesman last November appeared to suggest that David Lammy would serve the full term – expected to last until 2029 – as foreign secretary. “Yes, he is the Secretary of State,” the spokesman said at the time.
Shadow Treasurer Gareth Davies said: “The fact that Keir Starmer has repeatedly refused to say whether Rachel Reeves will stay on as chancellor speaks volumes.”
Meanwhile, Starmer stressed that ministers must be “ruthless” in containing public spending as the government struggles to stay within its borrowing rules.
“In terms of a ruthless approach when it comes to funding and spending, yes, we will be ruthless,” Starmer said. “We have clear financial rules, and we will adhere to these financial rules.”
Recent turmoil in bond markets has pushed up government borrowing costs, threatening to blow a hole in Reeves' promise to balance everyday spending with tax revenues in 2029.
UK borrowing costs have risen sharply since the October Budget, as a global bond sell-off combined with concerns about higher borrowing and a stagnant UK economy. They increased further on Monday, with the 10-year bond yield rising 0.04 percentage point to 4.87 percent, heading towards the 16-year high reached last week. Yields rise when prices fall.
Sterling, caught in the middle of a bond sell-off, lost another 0.4 percent on Monday against the resurgent US dollar, lifting the pound to $1.215 by early afternoon trading, and taking its losses for the year to more than 2.8 percent. The worst performing among the major global currencies.
Reeves is under pressure to act, said Dean Turner, an economist at UBS Wealth Management, because waiting and hoping “the whole episode is over” will not be seen by investors as a “credible” response.
The Chancellor is awaiting new data this week that would shed more light on the government's efforts to boost the economy.
Official inflation figures for December will be published on Wednesday, which are expected to show that annual growth in the CPI reached 2.6 percent last month, unchanged from November's reading.
November GDP figures are due out the next day, with a Reuters poll indicating a slight rise of 0.2 per cent.
Higher yields since the Budget will not only dampen growth expectations, but are likely to add around £12bn to the government's annual interest costs, according to calculations by Rob Wood of Pantheon Macroeconomics.
If it continues, it will wipe out the Chancellor's entire £9.9bn headroom against her current budget base, reinforcing calls for the Chancellor to take action as soon as March to cut public spending further.
“Reeves will have to tighten policy in the spring,” he said in a note. “But it is likely to make gradual cuts in spending plans gradually over five years.”
