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AmextaFinance > News > Keir Starmer refuses to back Rachel Reeves amid welfare fallout
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Keir Starmer refuses to back Rachel Reeves amid welfare fallout

News Room
Last updated: 2025/07/02 at 8:21 AM
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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Sir Keir Starmer declined to say that chancellor Rachel Reeves would remain in her post until the end of parliament, during a combative Prime Minister’s Questions following Labour’s dramatic gutting of its welfare bill last night.

Reeves, who sat beside Starmer during PMQs on Wednesday, was visibly upset and appeared to shed a tear as the prime minister stopped short of giving her his full backing when asked about her future by Conservative leader Kemi Badenoch.

Starmer, who has previously publicly backed Reeves, said he was “thankful” for the chancellor but the absence of full-throated support will increase speculation that her position is under threat.

Reeves has become a target for rebel anger over Labour’s handling of the welfare reforms.

Badenoch said the chancellor was being used by Starmer as “a human shield for his incompetence” and said that she looked “miserable”.

As PMQs ended, Reeves was ushered out of the chamber by her sister and fellow MP, Ellie Reeves, who is chair of the Labour party. She appeared to squeeze the chancellor’s hand as she guided her from the chamber.

A Labour spokeswoman, asked why Reeves appeared distraught, said she had no comment and referred questions to the Treasury.

She added: “The chancellor is going nowhere. She has the prime minister’s full backing.”

The spokeswoman said the prime minister had previously said Reeves would serve as chancellor for the whole parliament. “He doesn’t have to repeat [that] every time.”

Asked whether Reeves had offered her resignation, the spokeswoman said: “No.” She said Reeves and Starmer were getting on with delivering reform.

A spokesperson for Reeves said: “It’s a personal matter, which — as you would expect — we are not going to get into. The chancellor will be working out of Downing Street this afternoon.”

A spokesperson for Badenoch said: “The ‘personal matter’ doesn’t cover it. I think we should find out what’s going on.”

Asked what markets might make of the chancellor appearing to cry in the House of Commons, the Labour spokeswoman said: “We don’t comment on markets.”

Gilts on Wednesday fell as investors grew increasingly nervous about the UK public finances, pushing the 10-year yield up 0.17 percentage points to 4.63 per cent, the biggest one-day move since the global bond sell-off in April. The pound dropped 0.8 per cent against the dollar and 0.3 per cent against the euro.

“The conclusion from the gilt price action this afternoon is that the market actually likes Rachel Reeves,” said Mike Riddell, a fund manager at Fidelity International.

Labour’s U-turn late on Tuesday managed to stop its welfare reform bill from being defeated, but required the prime minister to gut it of any measures that may have led to a net saving in the long run.

Reeves’ position is of huge interest to investors as she has pledged to abide by strict fiscal rules. But she is operating with minimal fiscal headroom and the government’s U-turn on welfare has blown a £5bn hole in her plans.

There is growing speculation she will need to increase taxes at the autumn Budget or pare back Labour’s spending plans — something that has become more challenging with backbench MPs increasingly aware of the sway they can exercise over the government’s agenda.

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News Room July 2, 2025 July 2, 2025
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