Keir Starmer wants to axe Rachel Reeves as Chancellor in a major shake-up of his top team to revive Labour’s plunging popularity.
In a shock move, the Prime Minister is considering moving Home Secretary Yvette Cooper to the Treasury to boost the country’s economic fortunes.
His reshuffle would see Starmer-loyalist Pat McFadden, currently the Chancellor of the Duchy of Lancaster, shift to the Home Office as the government seeks to get a grip on the immigration crisis.
Defence Secretary John Healey is also facing the bullet because of an ongoing defence spending row.
The merry-go-round means Luke Pollard could replace Healey at the MoD with Labour newbie and former Royal Marine Alistair Carns tipped for a defence role.
Insiders say an “active process is going on” as Sir Keir considers how and when to execute a reshuffle, which is most likely to happen in the Spring.
A Whitehall source said: “Keir needs to shake things up and there is an active process going on to consider all the options.”
They added: “There is no doubt that the first six months have been pretty rough and the poll ratings show that. Something needs to change.”
The source said that Former Foreign Secretary David Miliband could also be brought back into the fold, replacing Peter Mandelson as President of the Global Counsel.
Mr Miliband was understood to be on the shortlist to become the UK’s new US Ambassador in Washington, a role eventually given to Mr Mandelson.
Ms Reeves has come under intense pressure since her Halloween Budget horror show with her policies deeply unpopular and politically damaging.
Her decision to scrap the Winter Fuel Payment for pensioners has been met with a furious backlash as has her move to clobber farmers and family businesses with a 20% inheritance tax raid.
The Chancellor’s national insurance hike to employers has also sparked fears of a surge in unemployment this year with some economists warning the economy should be on “recession watch”.
A further pinchpoint is due next month when the OBR, the government’s spending watchdog, publishes its economic and fiscal forecast on March 26.
If, as is expected, the news is grim, the Chancellor could be forced to squeeze departmental spending again, further infuriating Cabinet colleagues.
Labour’s big pitch to voters has been its promise to drive economic growth.
But a flatlining economy plus the government’s failure to tackle the UK’s immigration crisis has seen Labour and Sir Keir’s popularity tumble.
Earlier this week Nigel Farage’s Reform UK topped a landmark poll, coming ahead of Labour and the Tories for the first time ever.
Reform now sits on 25% with Labour second on 24% and the Tories in third on 21%, according to the Sky News/YouGov survey.
The Conservatives are on 21 per cent with Lib Dems are on 14 per cent and the Greens just narrowly below 10 per cent.
It is a dramatic slide in fortunes for Labour, which cruised to a landslide on July 4, with 35% of the electorate.
Furthermore, Mr Farage has a net favourability rating of -27 whereas Badenoch dropped to -29 this month.
The Prime Minister is less popular than both his main rivals with his net favourability rating now as low as -36.
Labour has been contacted for a comment.
