Keir Starmer was struggling to contain turmoil in the Treasury last night as pressure mounted on Rachel Reeves and her deputy Tulip Siddiq.
As the pound took another battering on the financial markets, the Prime Minister was forced to throw a protective arm around his embattled Chancellor.
Sir Keir said that, despite stuttering growth, surging government borrowing costs, and a growing business backlash, Ms Reeves was doing a ‘fantastic job’ running the economy.
On a chaotic day, Downing Street took the highly unusual step of saying Ms Reeves was safe in her job until the next election – suggesting she will not be sacked however bad the economic crisis becomes.
No 10 was also forced to voice ‘full confidence’ in City minister Tulip Siddiq, who is facing growing pressure over corruption allegations which she disputes, but which are now being examined by the PM’s sleaze investigator.
Former Tory finance minister Gareth Davies said Labour had ‘two lame ducks’ in the Treasury.
‘Labour’s inaction and indecision is worsening this market turmoil of their making. They must urgently get a grip on their plans,’ he added.
The developments came as: Markets piled further pressure on the Chancellor, with long-term government borrowing costs hitting a new 27-year high yesterday and the pound suffering for a fifth day in a row;
The Prime Minister through a protective arm around Chancellor Rachel Reeves, saying she was doing a ‘fantastic job’ managing the economy
Sir Keir signalled that the Treasury may have to make emergency spending cuts within months unless government borrowing rates fall
No 10 said the PM had ‘full confidence’ in City minister Tulip Siddiq, who is facing growing pressure over corruption allegations, which she denies
The president of the CBI warned that Labour’s controversial workers’ rights charter would cost jobs and become ‘an adventure playground’ for employment lawyers;
Sir Keir signalled that the Treasury may have to make emergency spending cuts within months unless government borrowing rates fall back;
A Bangladeshi politician called for a full corruption probe into whether Ms Siddiq, whose aunt ruled the country with an iron fist until last year, had any involvement in money being ‘looted from a Third World country’;
Ms Reeves returned from a controversial trip to China where a promised reset of relations with the communist superpower produced just £120 million a year in extra investment;
Ministers are braced for more gloomy economic data which is expected to show that both inflation and growth are off course.
Tory leader Kemi Badenoch also turned her fire on the Chancellor and her beleaguered junior minister last night.
She said: ‘Rachel Reeves has driven Britain’s economy into the ground. The markets are in turmoil and business confidence has crashed, yet the Chancellor is nowhere to be seen.
‘Labour promised stability and instead the City minister is mired in corruption investigations and the Chancellor is hanging on by her fingernails.’
The PM insisted that he would ‘stick to fiscal rules’ during a major speech at University College London
Sir Keir speaks with researchers during a visit to the Manufacturing Futures Lab at UCL on Monday
Fellow Tory MP Neil O’Brien, who worked in the Treasury under George Osborne, said: ‘This Labour Government feels tired and sleazy with the anti-corruption minister mired in corruption [allegations] and the Chancellor clinging on to her job despite the grotesque failure of her Budget.’
Ms Reeves has faced mounting pressure in recent days after financial markets turned on the UK, pushing her towards breaking her own ‘fiscal rules’ when the Office for Budget Responsibility publishes an update on the economy on March 26.
Sir Keir yesterday said the Government would ‘absolutely stick’ to the rules, which include reducing borrowing.
The PM refused to rule out a package of emergency spending cuts in March to balance the books. No 10 confirmed that the Treasury was also considering the case for further welfare reforms to save money.
‘We’re going to stick to the fiscal rules,’ he said. ‘That is a very important thing that we’ve said throughout.’
Sir Keir added: ‘I’m confident in our mission for growth and I’m confident, completely confident in my team. Rachel Reeves is doing a fantastic job. She has my full confidence. She has the full confidence of the entire party.’
But some Labour MPs believe Ms Reeves will not survive unless she can turn round the economy this year.
One urged Sir Keir to remove her, saying: ‘I personally have never been a strong supporter of Rachel Reeves. I don’t think she’s competent and I think the only way to start to restore confidence is with a new Chancellor.’
It comes amid further signs that confidence in the Government’s handling of the economy is crumbling, with all three of Britain’s biggest business groups speaking out yesterday.
Rupert Soames, chairman of the Confederation of British Industry, told the BBC that by asking business to fill in a £22 billion hole in public finances, Labour had ‘created another… a hole in the confidence and trust that business has in the Government’.
Jane Gratton, of the British Chambers of Commerce, said: ‘Business confidence has been hit hard since the Budget.’And the Institute of Directors said Ms Reeves’ Budget had resulted in a ‘precipitous decline in business confidence’, adding that ‘the snuffing out of growth in the latter part of 2024 will leave the Chancellor with little fiscal room if any’.
