Rachel Reeves has launched a rearguard action to save her job as chancellor, telling friends she would like to stay in the post even under a new prime minister.
The chancellor’s supporters have been urging MPs to back her if Keir Starmer is replaced later this year, saying she is the only candidate who can safeguard the country’s finances.
The backbench lobbying push comes amid a broader tussle among Labour MPs for position as they prepare for what happens if Andy Burnham wins the Makerfield byelection and replaces Starmer as prime minister.
Reports have suggested Burnham is considering appointing Ed Miliband as chancellor if he makes it to No 10. But Reeves’ allies are warning that the energy secretary would not be trusted by the bond markets, which set the government’s borrowing costs.
One Labour MP who is close to the chancellor said: “I am concerned that we may lose everything if a new leader sacrifices the chancellor for promises and new alliances they are currently forging with MPs who fancy the job for themselves. The biggest fear for the bond markets and the unions is Ed Miliband.”
Another said: “Rachel has been very candid with us about the need to carry on. A double change is not the right thing to do.
“With her credibility in the markets, if Rachel is given a clearer and slightly different direction she could provide the necessary assuredness to the markets. Ed Miliband wouldn’t be able to do that.”
Spokespeople for Reeves and Miliband declined to comment.
Against the backdrop of tumult in the Labour party, with Burnham having launched his campaign for Makerfield on a pledge to challenge Starmer’s leadership, Reeves has had one of her better weeks in office.
On Monday the International Monetary Fund increased its forecast for UK growth, predicting the economy would grow 1% this year rather than 0.8%.
Then on Wednesday, figures showed inflation falling to 2.8%, faster than economists had expected. On the same day, the prime minister announced that the government would postpone the planned rise in fuel duty, a policy the chancellor has been working on for several weeks.
On Thursday, Reeves announced the final pieces of her cost-of-living plan, revealing a surprise cut to VAT on family attractions such as soft play centres and theme parks for the summer.
In the Treasury, officials were delighted that the “Great British Summer Savings” plan led the news bulletins all afternoon, and that it had not been leaked beforehand.
They had given the proposed VAT cut the codename “Project Mint” in a bid to make sure no one except for a close group of the chancellor’s advisers caught wind of it.
But Reeves continues to face serious headwinds to her prospects of staying in post. As well as the likelihood that Burnham would seek a clean break with the Starmer government in senior roles, she has struggled to persuade MPs or the public that she can overcome the new economic challenges posed by the Iran war. On Friday, figures showed that the government borrowed more last month than expected.
Alongside the economic and policy news has come a series of punchy personal appearances by Reeves.
On Wednesday afternoon, she hit back publicly against a Reform UK supporter who interrupted an interview she was giving to shout abuse about Starmer and the Labour party.
“I love our country, and one of the things about our country is good manners,” she called after him as he drove off. “Not very British.”
Her bullish attitude continued the rest of the day. That evening she hosted a reception for about 60 MPs at No 11, where she struck a defiant note despite a public row with supermarket bosses who were criticising her attempts to get them to agree to voluntary price caps.
“If they think that it is a good strategy to go out on the telly and the radio saying that there’s nothing that they can do and it’s outrageous that the government is asking for them to help families, they’re doing our comms for us,” she joked, according to one person there.
Reeves’ friends insist she is the only person who can keep the country’s borrowing costs down in the long-term given her proven commitment to fiscal responsibility.
“There is, in my view, real value in consistency and predictability at the Treasury,” said one.
Some analysts say the chancellor is now reaping the rewards of her refusal to change or break her borrowing rules earlier, though some believe she is still too timid when it comes to tackling the cost of living.
“Some of the unpopular things the chancellor did early on in the parliament to put the country on the right fiscal track have proved to be a better bet than people thought they were at the time,” said Harry Quilter-Pinner, executive director of the Institute for Public Policy Research.
“But if progressives are going to deal with the anger that people across the country feel, we are going to have to do some bigger things, whether that is by freezing rents or unveiling a bigger intervention in the energy markets.”
Some Labour MPs however have been infuriated by what they see as Reeves’ open lobbying to remain in her job when they see her as being at fault for many of the mistakes Starmer has made in office, such as cutting winter fuel payments or attempting to reduce disability benefits.
And some have been angered by the argument of those close to her that only she can calm the bond markets.
“Every single one of us understands how important credibility is with the bond markets,” said one Labour MP. “We all signed up to a manifesto with the fiscal rules at their core.”
Although Burnham has not commented on who would be his chancellor if he were to win Makerfield and then succeed Starmer, Labour MPs believe Miliband and Reeves would be close to the top of his list.
But while Miliband has prioritised the green transition throughout his career, Reeves has tended to be more focused on the cost to taxpayers. The two clashed when Starmer and Reeves slashed Labour’s planned green energy scheme while in opposition.
“The two may have served in the same cabinet and been close in the past, but they have very different instincts,” said one Labour insider. “The fight over who gets to be chancellor is almost as important as that for prime minister.”
