Worried Labour MPs fear if the Chancellor is shown the door it could spark chaos.
Rachel Reeves could be replaced in a plot it’s been reported (Image: Getty)
Frantic Labour MPs are attempting to save Rachel Reeves from the chop because they fear her exit from Number 11 could spark bond market turmoil. Fears are rising inside Labour that Sir Keir Starmer could be toppled as leader if predicted terrible local elections for the party become reality when voters go to the polls this week on Thuesday May 7.
Many believe former party big beast and now Net Zero zealot and energy secretary Ed Miliband could be being lined up to replace Ms Reeves as Chancellor.
It’s thought leadership rivals to Sir Keir could install Mr Miliband in Number 11 to ensure his support for their bid for the top job.
If the Prime Minister is ousted following devastating local election results, many believe his Chancellor, considered by many of the next most important role in Government, would have to go as well.
It’s reported former deputy prime minister Angela Rayner, health secretary Wes Streeting are both champing at the bit to enter a leadership race if Sir Keir’s reign comes to an end. Greater Manchester mayor, Andy Burnham, who was previously blocked by Sir Keir from running as an MP, is also said to have plans to return to Westminster “within weeks”.
If Rachel Reeves is forced out of Number 11, some MPs fear market chaos (Image: Shutterstock)
A source told the Times: “People on the soft left would be pretty sceptical of the idea that you change the prime minister and don’t change the chancellor.”
But Labour MPs are not understood to be urging for Ms Reeves to stay on in Number 11 as the fear the markets could react badly as the nation faces possible spiking inflation caused by the Iran war.
One MP told the Times it would be “very bold and brazen and brash move to replace the chancellor just as some of the realities of the Iran war start coming to focus”. They claimed it would be a “good marker” to the markets if she stayed in post.
MPs are worried if Ms Reeves is kicked out the bond markets may react badly. Government bonds are essentially IOUs that can be traded in the financial markets. A bond is essentially a loan the government promises to pay back at the end of an agreed time, say five, ten, or 30 years. The government will also make regular payments, which can be once every three months, six months, or year, to the investor.
Pension funds are some of the biggest buyers of government bonds because they are usually considered a safe investment. If the markets are spooked or interest rates go up it can lower the confidence in the abiity of the Government to make payments, leading to bonds being sold off by investors.
The Chancellor has been under-fire for months following a series of U-turns (Image: Getty)
On Thursday the Bank of England held interest rates at 3.75% but warned that the Middle East energy shock could drive up inflation and lead to a hike in rates. It said that in a worst-case scenario where oil and gas prices stay higher for a longer amount of time, UK inflation could rise to as much as 6.2%.
Rachel Reeves said the Iran war is “one we have to respond to” after the Bank of England has left interest rates unchanged as it cited rising inflation due to the conflict. Responding to the Bank’s decision, the Chancellor said: “The war in the Middle East is not our war, but it is one we have to respond to.
“Every choice I make will be about keeping costs down for families and businesses, without repeating the mistakes we’ve seen in the past that resulted in higher inflation and higher interest rates.
“We entered this conflict in a stronger position because of the choices this Government took to build economic stability, and we are going further to take back our energy security, backing British industry and protecting households, to build a Britain that is stronger, more resilient, and prepared for the future.”
Conservative shadow chancellor Sir Mel Stride said: “Rachel Reeves has weakened our economy and left us vulnerable in the run up to the latest energy crisis. The conflict in the Middle East is pushing up prices – but the UK already had the highest inflation in the G7 thanks to Labour’s choices.
“Tax hikes, reckless spending and disastrous energy policies have paved the way for high inflation and interest rates staying higher for longer. We need a different approach: cutting the benefits bill, lowering taxes and drilling in the North Sea. We need to Get Britain Working Again.”