The position of Rachel Reeves, Britain’s most senior finance official, was the subject of growing speculation on Wednesday after she appeared visibly upset in Parliament as Prime Minister Keir Starmer declined to guarantee that she would keep her job.
Mr. Starmer had previously committed to keeping Ms. Reeves in her role as chancellor of the Exchequer until the next general election, but when asked on Wednesday by Kemi Badenoch, leader of the opposition, to repeat that pledge, he avoided the question.
But later on Wednesday, the prime minister’s office expressed support for Ms. Reeves, saying that she was “going nowhere.”
Ms. Reeves became chancellor last year amid high expectations. She was the first woman to hold the position, one of Britain’s great offices of state. She emphasized her credentials from previously working at the Bank of England and vowed to restore fiscal credibility to Britain after it was shaken by the tax and spending plans of the former prime minister Liz Truss.
But she has faced growing criticism from some within the governing Labour Party because of her efforts to use savings from social welfare to stabilize the government’s difficult public finances.
The exchange on Wednesday came after a fraught battle over government plans for changes to the social welfare system. On Tuesday the government won a vote on its legislation but suffered a significant rebellion from 49 of its own lawmakers even after making a series of concessions that critics claimed had gutted the bill.
Those concessions wiped out much of the £5 billion ($6.8 billion) the chancellor had hoped to save.
Concerns about what that would mean for Britain’s budget as well as the speculation over Ms. Reeves’s position weighed on some British assets. The pound slumped more than 1 percent against the U.S. dollar. The yield on 10-year U.K. government bonds, which moves inversely to prices, rose 0.18 percentage points, to 4.63 percent.
Ms. Reeves has committed herself to strict fiscal discipline, promising to balance the government’s day-to-day budget in just a few years. While that stance has been supported by financial markets and institutions like the International Monetary Fund, it has forced her to quickly look for big savings to avoid repeatedly raising taxes.
Some have criticized her for putting fiscal constraints above the Labour Party’s center-left values.
During a heated session of prime minister’s questions on Wednesday, cameras caught images of a tearful Ms. Reeves as she sat next to Mr. Starmer. The Treasury said in a statement afterward that her display of emotion was “a personal matter, which — as you would expect — we are not going to get into.” It added that the chancellor would work out of Downing Street on Wednesday afternoon.
Since taking office, Ms. Reeves has said she needed to make “difficult” choices to improve the nation’s public finances, which have been strained by high debt levels, high taxes and stretched public services. But before the general election, Ms. Reeves ruled out raising taxes on “working people,” effectively eliminating increasing taxes on the main revenue generators for the government. That has left her with little room to maneuver financially.
In recent months, President Trump’s rewriting of the global trade system and the escalating conflicts in the Middle East have also worsened the economic backdrop for the chancellor.
While she can’t control these global events, Ms. Reeves faces a tightly balanced fiscal picture that can be easily disrupted. Small changes to the economic outlook for Britain, whether in the form of downgrades in economic growth projections or forecasts of higher inflation, have quickly eaten away at any buffer Ms. Reeves had left in her tax and spending plans.
Analysts at Rabobank said in a research note on Wednesday that investor optimism in Britain “has been sapped,” adding that “growth and productivity have undershot expectations” and that Mr. Starmer’s U-turn on welfare reform meant he had “lost authority.”
“Since the savings from welfare reform that chancellor Reeves had penciled in have now evaporated, U.K. budget issues are back in the fore,” they wrote.
Ms. Reeves has been held responsible for some of the government’s most unpopular decisions, while struggling to get credit for reforms that the Treasury expects will bolster the economy.
During Wednesday’s exchanges in Parliament Ms. Badenoch said that Ms. Reeves looked “absolutely miserable,” but added: “the reality is that she is a human shield for the prime minister’s incompetence.”
Last year, she substantially raised taxes on businesses, through charging a high levy on employee wages, in order to finance more spending on public services. That decision surprised and angered many companies that felt it wasn’t in keeping with Labour’s pre-election promise to be “the undisputed party of business.”
There are now expectations that the failed efforts to save enough money through welfare cuts could force the chancellor to raise taxes again later this year. Economists at Deutsche Bank said they expected between £10 billion and £15 billon of tax increases in the fall.
“The risk is that Chancellor Reeves needs to dig deeper to deliver even more,” they added.
Stephen Castle is a London correspondent of The Times, writing widely about Britain, its politics and the country’s relationship with Europe.
Eshe Nelson is a Times reporter based in London, covering economics and business news.
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