The Prime Minister’s actions strongly suggest that he has lost confidence in the Chancellor
Telegraph View
01 September 2025
With his decision to centralise power in Downing Street at the expense of the Treasury, Sir Keir Starmer has demoted and humiliated Rachel Reeves.
The relationship between prime ministers and chancellors is always fraught with danger, but good government depends on an effective division of labour between its two most powerful members. While that relationship endures, much can be achieved. When it breaks down, the end is usually nigh. That happened with Margaret Thatcher and Nigel Lawson as well as Tony Blair and Gordon Brown. More recently, Boris Johnson fell out, first with Sajid Javid and later with Rishi Sunak. Now the same fracture threatens a Labour government that after barely a year is already floundering and deeply unpopular.
Sir Keir’s solution is to seize the reins of power from his Chancellor: most visibly, by poaching her deputy, Darren Jones, to take up a new role as Chief Secretary to the Prime Minister.
For good measure, Sir Keir has also nabbed a senior Treasury official, Dan York-Smith, to be his Principal Private Secretary and has appointed his own economic adviser, Baroness Shafik.
With power comes responsibility. This particular power grab ensures that while Ms Reeves will deliver the Budget speech, it will be seen as Starmer’s Budget. If it fails to deliver a change in Labour’s fortunes, Sir Keir will have no-one else to blame and no-one to hide behind. If this autumn’s Budget is seen as a failure, such authority as he still possesses will be severely damaged. For a premier in such a predicament, self-aggrandisement is a high-risk strategy.
Yet what is the grand vision that the Prime Minister longs to turn into reality? He has chosen to be judged on the economy, small boats and the NHS, but so far there has been little to boast of on any of these fronts.
On the contrary: there has been too much of what soldiers call “order, counter-order, disorder”. The prime example was means-testing the Winter Fuel Allowance: an off-the-shelf Treasury ploy, unwisely adopted by Ms Reeves, which backfired so badly that No 10 has had to all but close it down, leaving nothing but red faces.
The Starmer government resembles an exercise in aimlessness. It has a Plan for Change, but no grasp of what exactly it wants to change. Concentrating power at the centre of government makes sense in an emergency, such as a war or pandemic, when there is a consensus about aims. At present, however, there is no consensus about aims even within the Parliamentary Labour Party – as the fiasco of welfare reform demonstrated.
Now and then, the Prime Minister recalls that last year he set out to achieve the consistent growth that had eluded his predecessors. How will his latest reshuffle help to achieve that goal?
We already know a good deal about Mr Jones, who has changed his job title but not much else. He was thoroughly implicated in the last Budget, which imposed £40bn of growth-destroying taxes while doing nothing to cut either spending or debt.
Will the new economic adviser, Baroness Shafik, give the Government a new direction? If so, it is likely to be a disastrous one.
She co-chaired the Economy 2030 Inquiry with Torsten Bell, the think-tanker turned Treasury minister who is now the Chancellor’s right-hand man. Some of their ideas have already been enacted: abolishing non-dom status, for example, has already made us world champions in exporting wealthy individuals.
But Baroness Shafik and Mr Bell advocate a whole range of new taxes on capital, property, business and transport, including widening inheritance tax by removing the nil-rate band, imposing National Insurance on rental income, capital gains tax on death and emigration and road duty for electric vehicles. In short, the PM’s new economic guru would dearly like to tax everything that moves – and everything that doesn’t.
Such fiscal fanaticism is hardly likely to restore the Government’s credibility. Prime ministers hang onto chancellors who are trusted by the markets. But the present incumbent hardly enjoys the prestige of a Lawson or a Brown.
What, then, is the point of prolonging her tenure – and her all-too-visible misery? If, as his actions yesterday strongly suggest, Sir Keir Starmer has lost confidence in Rachel Reeves, why won’t he sack her?
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