Sir Keir Starmer's decision to abandon planned income tax increases has left the Prime Minister significantly weakened and facing growing leadership speculation within his own party, according to senior Labour figures.
Growing Despair Among Ministers
Ministers and backbenchers have reacted with despair to news that plans to hike income tax had been scrapped, with multiple sources claiming the dramatic U-turn demonstrates that nobody is in charge of the government. The Independent understands that supporters of Health Secretary Wes Streeting are actively discussing his potential to replace Sir Keir in what some describe as a "coronation" to rescue the Labour government.
One MP warned that the tax policy reversal has made a leadership challenge more likely, while a serving minister described the Prime Minister's position as fundamentally weakened. The decision, leaked to The Financial Times, follows a difficult week for Downing Street during which sources suggested Sir Keir was prepared to fight off any attempted plot to replace him with Mr Streeting.
Economic Consequences and Alternative Plans
Economists have raised serious concerns about the political nature of the decision, warning that the government will now struggle to build sufficient financial buffers to protect the UK from future economic shocks. Instead of the planned income tax rise, the Treasury is reportedly preparing a package of smaller tax measures targeting gambling firms, banks, and properties valued at £2 million or more to address an estimated £20 billion spending shortfall.
The Chancellor will also announce an extension to threshold freezes for an additional two years and is considering a new levy on high-value properties when the Budget is delivered on November 26. These measures come after internal opposition to the income tax hike, led by Chief of Staff Morgan McSweeney and Welfare Secretary Pat McFadden, who warned about breaching voter trust.
Leadership Speculation Intensifies
Despite Mr Streeting's public denials of involvement in any leadership plotting, sources indicate that recent briefings - blamed on Mr McSweeney, though denied by the Prime Minister - have accelerated discussions about replacing Sir Keir. One senior Labour figure revealed: There are MPs now ready to move immediately after the Budget.
Another source added that while Mr Streeting doesn't want to be seen as "wielding the knife," he would prefer a smooth transition. The political calculation among some MPs suggests that if Sir Keir survives until the May devolved elections in Scotland and Wales, plus council elections in England, other potential rivals including Manchester Mayor Andy Burnham and former deputy prime minister Angela Rayner might position themselves for leadership bids.
One veteran Labour MP delivered a stark assessment: Sir Keir's leadership was dead well before this U-turn. They just didn't realise it. The MP added fears about what the Prime Minister's team might do to maintain power, warning: "I fear it will do irreparable damage. This is what the crisis of democracy looks like."
The situation is further complicated by new deputy leader Lucy Powell, elected on an anti-Starmer platform, who allies describe as "proving to be a real handful" for Downing Street. Her recent intervention warning against breaking manifesto promises on tax increases came just days before the income tax decision was reversed.
