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Rachel Reeves will remain Britain’s chancellor until at least the next general election, Downing Street said on Monday, as Sir Keir Starmer sought to play down speculation her position could be under threat.
The statement came after the prime minister told a news conference 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 has been very clear that he has full confidence in the chancellor and that he will work with her in her role as chancellor for the whole of this parliament,” Starmer’s spokesman said.
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. Borrowing costs have also risen sharply since its October budget following a global bond selloff.
Gilt bond yields rose on Monday, with the 10-year yield up 0.03 percentage points to 4.87 percent, moving toward a 16-year peak set last week. Yields rise when prices fall.
Sterling, caught in a selloff in gold, lost another 0.3 percent on Monday against a rebounding U.S. dollar, lifting the pound to $1.216 by late afternoon trading and taking its losses for the year to nearly 2.8 percent – the worst among major world currencies.
Reeves is expected to make a statement to MPs on Tuesday about the visit to China, but will also use the opportunity to make his first parliamentary defense of his economic policies since the Christmas break.
She was heavily criticized by the opposition Conservative Party, which used Starmer’s initial reticence to confirm that Reeves would be chancellor until the end of the parliament.
Tory Treasury spokesman Gareth Davies said: “The fact that Keir Starmer has repeatedly refused to say whether Rachel Reeves will remain chancellor speaks volumes.”
British prime ministers typically refuse to guarantee any cabinet minister a job for the entire parliament, knowing they will then be called upon to make such public guarantees to every member of their team.
But the Tories noted that last November Starmer’s spokesman appeared to suggest that David Lammy would be foreign secretary for the full term – which is due to run until 2029.
Downing Street confirmed on Monday that Lammy would remain in office until the next general election, but then refused to give such assurances to any other cabinet member, including Home Secretary Yvette Cooper.
A spokesman for Starmer said: “I’m not going to go through every cabinet member.” He added that Starmer believes he has the “best possible people” in his top team.
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.”
A recent increase in the UK government’s borrowing costs has threatened to derail Reeves’ pledge to balance day-to-day spending with tax receipts by 2029.
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.”