Sir Keir Starmer has refused to guarantee Rachel Reeves’s long-term future as chancellor amid ongoing market turmoil, as she’s urged to convene an emergency meeting with the banks. The prime minister has been giving a speech about AI, saying the tech could help turn the economy around.
Monday 13 January 2025 14:23, UK
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From a self-proscribed “iron chancellor in waiting” in the run-up to last year’s election, to now being “under fire”, our chief political correspondent Jon Craig says it’s a tough time to be Rachel Reeves.
Ahead of her return from a controversial trip to Beijing, the prime minister has today offered what Jon describes, in football parlance, as “the dreaded vote of confidence”.
In football, under-fire managers often don’t last long once their club have backed them in such terms.
Sir Keir Starmer even said earlier Reeves had the confidence “of the entire Labour Party”, something Jon doubts is the case given some of the measures she’s imposed in recent months.
‘An embattled figure’
From taking away the winter fuel allowance from millions of pensioners and imposing inheritance tax upon farmers, to tax rises on businesses and not compensating the WASPI women, Reeves had made some enemies.
She’ll be in for a tough time when she faces MPs tomorrow, says Jon, not just over that China trip but also turmoil in the markets.
Reeves has “become an embattled figure”, Jon adds “blamed for many of the problems facing the government after just six months in power”.
In the very last Politics At Jack And Sam’s featuring Politico’s Jack Blanchard, our deputy political editor Sam Coates was discussing the state of the British economy.
He says Chancellor Rachel Reeves could face trouble on 26 March, when she delivers the spring statement, that could lead to “more budget cuts further down the tracks”.
“She’s in a very, very tight corner,” Sam explains. “The way out of it I think is growth.”
Hear more of what Sam and Jack had to say below:
Conservative leader Kemi Badenoch has just accused Labour of driving the UK’s economy “into the ground”.
In a social media post sent after Sir Keir Starmer’s speech on AI today, she said: “The prime minister just refused to back his chancellor staying in her job.”
He failed to do so twice in questions after his address earlier.
Ms Badenoch said: “Keir Starmer and Rachel Reeves have driven Britain’s economy into the ground.
“The markets are in turmoil and business confidence has crashed, yet the chancellor is nowhere to be seen.”
Our political editor Beth Rigby was among the journalists who asked the prime minister a question after his speech about AI.
She asked about the potential for spending cuts amid the economic challenges the government’s facing (read more here).
Speaking after, Beth says the speech was clearly “overshadowed” by the market turmoil – with the cost of government borrowing having hit its highest level since the financial crisis.
Growth is flatlining, she adds, and with a commitment not to raise taxes for the time being, the prime minister was eventually clear that he’s “prepared to be ruthless” if cuts are needed to balance the books.
The next few months will be crucial, says Beth, ahead of the next major independent economic forecast for the UK.
In the meantime, the tough questions continue – including whether the chancellor will even keep her job.
Sir Keir Starmer says he has “full confidence” in her, but didn’t guarantee she’d still be in post for the next election.
“That he’s even being asked that question tells you a bit about the nervousness in the markets,” says Beth.
Ongoing turmoil in the markets meant the prime minister’s Q&A with journalists after his speech on artificial intelligence veered more towards the economy than perhaps he might have liked.
As markets opened this morning, the pound headed towards the $1.21 mark, the lowest level since November 2023.
UK borrowing costs are also up, along with the oil price, and there are now fears mortgage rates could spike.
‘Many will be worried’
The Lib Dems are urging the chancellor to hold an emergency summit with lenders to reassure mortgage holders.
The party’s Treasury spokesperson, Daisy Cooper MP, said the October budget “has not worked” and “many will be worried”.
“Rachel Reeves can no longer sit on her hands as this turmoil threatens to have real consequences for millions of homeowners,” she added.
Sir Keir Starmer insisted he had “full confidence” in his chancellor earlier, but didn’t guarantee she’d still be in post by the time of the next election.
Next, Sir Keir Starmer is asked whether Rachel Reeves will still be chancellor at the next general election.
The prime minister doesn’t explicitly answer.
Instead, he says the UK’s fiscal rules are “absolutely central to what we do”.
“The changes we’re bringing about… all of these are designed to ensure that we get the growth that we need.
“That is why I am confident in our plan for growth.”
Sir Keir adds he is “confident in our team”.
“We never pretended… that after 14 years of failure you can turn around our economy and our public services before Christmas.”
However, he says Labour have the determination to do this in time.
‘Full confidence’ in chancellor
Asked again if Ms Reeves will be his chancellor for the duration of this parliament, Sir Keir says she has his “full confidence”.
“She has the full confidence of the entire party,” he adds.
“She was given an incredibly challenging task at the budget because not only was the economy broken, but we had a £20bn black hole.”
Sir Keir says his chancellor “took the tough decisions” and she was “right” to do so.
He again refuses to guarantee he’ll keep her in post, though.
Sky’s political editor Beth Rigby now asks Sir Keir Starmer if he will have to implement spending cuts given the market turmoil.
He avoids answering the question directly.
He says economic growth is “the number one mission of this government”, and that there was flat growth under 14 years of the Conservatives.
He lists changes to the planning regime and the move towards green energy as part of his plans to grow the economy, as well as measures in last year’s budget and making more use of AI.
He says AI will “change things quicker than we think”, with improvements possible within three to five years rather than 10.
Sir Keir Starmer is now taking questions from the media, which begin on the matter of the economy.
The prime minister is asked about AI’s impact on growth, but also whether there will be further spending cuts as the “government looks to be in a hole” financially.
He says: “We have to look at this through the lens of opportunity.
“When it comes to jobs, the question isn’t the loss of jobs, it’s the changing jobs.”
Sir Keir says a doctor might be able to spend more time with patients, and less on paperwork.
This would allow people to spend more time on the “human aspect” of their work, he adds.
Starmer: AI will help turn economy around
Turning to the economy, Sir Keir reiterates that Labour has inherited a “real mess” and has to “turn it around”.
“AI will help us with that,” he says.
“I would argue that we would do it in any event… but it’s doubly necessary because of the mess of the last government.”
The prime minister does not rule out spending cuts.
During his speech on AI, Sir Keir Starmer says the technology can help improve public services.
He says AI “isn’t something locked away” behind the walls of companies – it can help every day people.
That includes helping teachers plan lessons, reduce NHS waiting lists, speed up planning applications… and even spot potholes.
He also says it will halve the time social workers spend on paper work, help spot tax avoidance, and reduce job centre form filling.
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