Rachel Reeves exits as chancellor in Burnham reshuffle
Rachel Reeves has left government after being removed as chancellor, as new Prime Minister Andy Burnham reshuffles his top team. The former chancellor declined another cabinet role, while deputy prime minister David Lammy and several Starmer allies were also sacked. Markets reacted as Burnham pledged to stick to existing fiscal rules but use any flexibility within them.
Key Takeaways
- Rachel Reeves confirmed she is out as chancellor and leaving government after declining another cabinet post.
- David Lammy has been removed as deputy prime minister and justice secretary.
- Housing secretary Steve Reed, business secretary Peter Kyle and other Starmer allies are also out.
- UK gilt yields rose and the pound slipped after Burnham signalled using flexibility within existing fiscal rules.
- Cost-of-living measures are due from Tuesday, with a wider 10-year plan later this year.
What happened to Rachel Reeves and the cabinet?
New Prime Minister Andy Burnham began appointing his top team on Monday after Keir Starmer formally resigned and Burnham was appointed by the king.
Rachel Reeves announced on social media that she is no longer chancellor and is leaving government altogether. BBC political editor Chris Mason reported she was offered a "big job" in Burnham's cabinet but declined; The Guardian said Sky News reported she turned down another role.
In her statement, Reeves called the Treasury post "the privilege of my life" and said she wished "the very best of luck" to her successor, Andy Burnham and his cabinet. She pledged continued support for Labour from outside the frontbench.
David Lammy confirmed he is out as deputy prime minister and justice secretary. Housing secretary Steve Reed, business secretary Peter Kyle, science and technology secretary Liz Kendall, Wales secretary Jo Stevens, attorney-general Lord Hermer and Darren Jones were also removed as the clear-out widened.
Why does the Treasury shake-up matter for markets?
The exit of Rachel Reeves matters beyond Westminster because she authored the government's self-imposed fiscal rules and has been the face of Labour's economic strategy. Burnham told reporters he would "stick to the fiscal rules" — meaning the existing ones — but would use "any flexibility" within them, while insisting he would take a "very prudent" approach.
According to The Guardian's live politics coverage, the yield on 10-year gilts rose eight basis points to 5.049% by the end of London trading. Sterling slipped 0.29% to $1.341, and the FTSE 100 closed 0.71% lower.
For readers tracking policy risk and market reaction, BlasterPost's Fintech & Crypto Alerts desk will continue covering how No 10's fiscal signals feed through to gilt pricing, sterling and risk assets.
What has Andy Burnham promised next on the economy?
In his first Downing Street speech, Burnham called his arrival a "circuit breaker" moment and said he wants the "right values and the right standards at the heart of government." He said cost-of-living plans would be announced from Tuesday, with a 10-year plan later this year.
He told reporters he was looking at cutting energy bills and bus fares as part of a funded package, and that he was "looking at" the frozen tax-free personal allowance ahead of an autumn Budget. Asked about restoring a 50p top rate of tax, he said it was "premature" to decide.
His first instruction as prime minister, he said, would be to end rough sleeping, alongside plans to redistribute power out of Westminster. A new chancellor is expected to work overnight on measures usually reserved for Budgets, heightening scrutiny of who replaces Rachel Reeves at the Treasury.