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Rachel Reeves will continue as UK chancellor at least until the next general election, Downing Street said on Monday, as Sir Keir Starmer sought to kill speculation that her position could be under threat.
The statement came after the prime minister said at a press conference that he had “full confidence” in Reeves, but twice declined to answer questions about whether she would keep her job until the next election, expected in 2029.
“He was very explicit that he has full confidence in the chancellor and he’ll be working with her in the role of chancellor for the whole of this parliament,” said Starmer’s spokesman.
Reeves, who returned on Monday from a visit to China, is under pressure to show she has a growth strategy after the UK economy stagnated at the end of 2024 with inflation ticking up. Borrowing costs have also risen sharply since her October Budget following a global bond sell-off.
Gilt yields increased on Monday, with the 10-year bond yield up 0.03 percentage points to 4.87 per cent, moving towards a 16-year high set last week. Yields rise when prices fall.
Sterling, which has been caught up in the gilts sell-off, lost another 0.3 per cent on Monday against a resurgent US dollar, taking the pound to $1.216 by late afternoon trading, and its losses for the year to almost 2.8 per cent — the worst performer among major global currencies.
Reeves is expected to give a statement to MPs on Tuesday on the China visit, but will also use the occasion to give her first parliamentary defence of her economic policy since the Christmas break.
She has been heavily criticised by the opposition Conservative party, which seized on Starmer’s initial reticence to confirm that Reeves would be chancellor for the remainder of the parliament.
Tory Treasury spokesman Gareth Davies said: “The fact that Keir Starmer has repeatedly refused to say whether Rachel Reeves will remain as chancellor speaks volumes.”
British prime ministers typically refuse to guarantee a job to any cabinet minister for an entire parliament, knowing they will then be invited to give such public assurances to every member of their team.
But the Tories noted that last November Starmer’s spokesman appeared to suggest that David Lammy would serve the entire term — expected to run to 2029 — as foreign secretary.
Downing Street confirmed on Monday that Lammy would stay in post until the next general election, but then declined to give such guarantees to any other cabinet member, including home secretary Yvette Cooper.
Starmer’s spokesman said: “I’m not going to run through every member of the cabinet.” He added that Starmer believed he had “the best people possible” in his top team.
Meanwhile, Starmer confirmed that ministers would have to be “ruthless” in containing public spending as the government struggles to stay within its own borrowing rules.
“In terms of the ruthless approach when it comes to finances and spending, yes, we will be ruthless,” Starmer said. “We’ve got clear fiscal rules and we’re going to keep to those fiscal rules.”
The recent increase in UK government borrowing costs has threatened to blow a hole in Reeves’ promise to balance day-to-day spending with tax receipts in 2029.
Dean Turner, an economist at UBS Wealth Management, said Reeves was coming under pressure to act, as waiting in the “hope the whole episode blows over” would not be viewed by investors as a “credible” response.
The chancellor is awaiting new data this week that will shed further light on the government’s efforts to strengthen the economy.
Official inflation numbers for December will be released on Wednesday, which are expected to show annual growth in the consumer prices index was 2.6 per cent last month, unchanged from the November reading.
GDP numbers for November are due out the following day, with a Reuters poll pointing to a slight uptick of 0.2 per cent.
Higher yields since the Budget will not only hamper the growth outlook, but they are likely to have added about £12bn to annual government interest costs, according to calculations from Rob Wood at Pantheon Macroeconomics.
If sustained, they would more than wipe out the entirety of the chancellor’s headroom of £9.9bn against her current budget rule, bolstering 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 she will likely phase in cuts to spending plans gradually over five years”.