Rachel Reeves has launched a rearguard action to save her job as chancellor, telling friends she would like to stay in the post even under a new prime minister. The chancellor’s supporters have been urging MPs to back her if Keir Starmer is replaced later this year, saying she is the only candidate who can safeguard the country’s finances.
The backbench lobbying push comes amid a broader tussle among Labour MPs for position as they prepare for what happens if Andy Burnham wins the Makerfield byelection and replaces Starmer as prime minister. Reports have suggested Burnham is considering appointing Ed Miliband as chancellor if he makes it to No 10. But Reeves’ allies are warning that the energy secretary would not be trusted by the bond markets, which set the government’s borrowing costs.
One Labour MP close to the chancellor said: “I am concerned that we may lose everything if a new leader sacrifices the chancellor for promises and new alliances they are currently forging with MPs who fancy the job for themselves. The biggest fear for the bond markets and the unions is Ed Miliband.” Another added: “Rachel has been very candid with us about the need to carry on. A double change is not the right thing to do.”
Against the backdrop of tumult in the Labour party, with Burnham having launched his campaign for Makerfield on a pledge to challenge Starmer’s leadership, Reeves has had one of her better weeks in office. On Monday the International Monetary Fund increased its forecast for UK growth, predicting the economy would grow 1% this year rather than 0.8%. Then on Wednesday, figures showed inflation falling to 2.8%, faster than economists had expected. On the same day, the prime minister announced that the government would postpone the planned rise in fuel duty, a policy the chancellor has been working on for several weeks.
On Thursday, Reeves announced the final pieces of her cost-of-living plan, revealing a surprise cut to VAT on family attractions such as soft play centres and theme parks for the summer. In the Treasury, officials were delighted that the “Great British Summer Savings” plan led the news bulletins all afternoon, and that it had not been leaked beforehand. They had given the proposed VAT cut the codename “Project Mint” in a bid to make sure no one except for a close group of the chancellor’s advisers caught wind of it.
But Reeves continues to face serious headwinds to her prospects of staying in post. As well as the likelihood that Burnham would seek a clean break with the Starmer government in senior roles, she has struggled to persuade MPs or the public that she can overcome the new economic challenges posed by the Iran war. On Friday, figures showed that the government borrowed more last month than expected.
