The ongoing tensions surrounding Rachel Reeves’ role as Chancellor and the Labour Party’s management of the economy have created a significant political storm. Recent exchanges during Prime Minister’s Questions (PMQs) highlighted the fragility of Sir Keir Starmer’s economic pledges and Reeves’ perceived struggles.
Kemi Badenoch, the Tory leader, seized the opportunity to critique Reeves and Labour’s fiscal policies, accusing them of fostering “fewer jobs, lower growth, and higher borrowing costs.” Starmer’s defense predictably relied on blaming the global economy and revisiting accusations of Tory economic mismanagement, invoking the oft-cited £22 billion deficit supposedly left by previous Conservative governments.
Despite his defense, cracks in Starmer’s economic strategy were apparent. His insistence on Reeves’ adherence to “iron-clad” fiscal rules and maintaining only one budget annually has raised eyebrows, especially amid rising borrowing costs and economic uncertainty. Critics argue these promises are untenable, with potential tax hikes or spending cuts looming as likely outcomes if Reeves cannot stabilize the economy.
Furthermore, Reeves has faced mounting criticism, with commentators and rivals branding her as a “zombie Chancellor” whose policies have allegedly stalled growth and credibility. Starmer’s public backing of Reeves—declaring his “full confidence” in her leadership—has paradoxically fueled speculation about her political longevity, given the historical pattern of such affirmations preceding ministerial exits.
The bond market’s influence looms large in this debate. As borrowing costs rise, the market’s reaction could dictate the next moves for Labour’s economic team, echoing the lessons from Liz Truss’s short-lived tenure as Prime Minister. The narrative of an external force—markets—asserting control over fiscal policy further complicates the Labour Party’s position.
For Starmer, the stakes are high. Maintaining Reeves as Chancellor amidst economic turmoil could either reinforce his leadership or expose vulnerabilities in Labour’s economic framework. Ultimately, the success or failure of their strategy will hinge on their ability to adapt to rapidly changing financial conditions and restore market confidence.