Sir Keir Starmer was forced to insist he has “full confidence” in Chancellor Rachel Reeves but could not deby she might be forced to make massive spending cuts as financial chaos continued.
The Prime Minister eventually backed Ms Reeves after being asked twice, following warnings the Government faces a stark choice between slashing services or introducing even more tax rises. And he confirmed the Treasury would be “ruthless” in demanding other departments control spending.
Sir Keir was launching his new AI strategy at an event in east London but the event was overshadowed by questions about the Chancellor’s stewardship of the economy.
Asked directly whether Ms Reeves would still be Chancellor by the time of the next General Election, Sir Keir initially would only say he was “completely confident in my team”.
But when he was asked a second time, Sir Keir said: “Rachel Reeves is doing a fantastic job, she has my full confidence.”
He added: “She is right to take the tough decisions.”
Ms Reeves has come under fire for jetting off to China last week for trade talks.
The Prime Minister also insisted Labour’s policies would succeed in growing the economy. However he refused to talk about the possibility of spending cuts when asked repeatedly by journalists whether they were likely
The pound has remained under pressure amid an intensifying sell-off in government bonds. This puts up the cost of government borrowing.
Sterling fell another 0.5 percent to 1.214 US dollars on Monday, having last week hit its lowest level against the dollar since November 2023.
The Chancellor is “absolutely right” to take a ruthless approach to public spending, Sir Keir Starmer said.
Asked about reports the Treasury asked other Government departments to be “ruthless” in making spending cuts, the Prime Minister told reporters: “Yes, we will be ruthless, as we have been ruthless in the decisions that we’ve taken so far.
“We have got clear fiscal rules, and we are going to keep to those fiscal rules, and that’s why the Chancellor was absolutely right in the words that she chose to describe the approach that we will take.”
The Government’s “fiscal rules” have fuelled speculation about spending cuts, as higher borrowing costs mean the Treasury is under more pressure to balance the books either by cutting spending or raising taxes further, and the Chancellor has already ruled out more tax hikes.
Sir Keir said: “We’re going to stick to the fiscal rules. That is a very important thing that we’ve said throughout.
“We set out those fiscal rules very early on in the day because we knew that the missing ingredient in recent years has been economic stability, we’re determined to bring about that economic stability, and that’s why the fiscal rules are absolutely central to what we do.”
He said changes to planning rules, the industrial strategy and embracing artificial intelligence would fuel growth.
“That is why I’m confident in our mission for growth and I’m confident, completely confident in my team.”
But, he added: “We never pretended, nor would anybody sensibly argue, that after 14 years of failure, you can turn around our economy and our public services before Christmas.
“Before the election, I said it’s not going to be possible to do this in six months. It’s going to take time.”
