Rachel Reeves
Reeves gave her final Chancellor interview as Burnham prepares to replace her with Ed Miliband without offering her a role. She blamed flat GDP on Iran-war energy costs and defended Winter Fuel clawback as "targeted and fair."
Rachel Reeves is governing as Chancellor in what appear to be her final weeks in the role. Andy Burnham is poised to enter Downing Street and appoint Ed Miliband as her replacement, declining to offer Reeves a position. Burnham has signalled "room within the manifesto for movement on tax," a departure from the fiscal rules she has enforced throughout her tenure. Reeves gave what is described as her final interview as Chancellor on July 12.
She continues to defend her economic record. Reeves attributed May's flat or contracting GDP to the US-Israel-Iran war's impact on fuel and energy costs, calling it "not a war we wanted or joined, but one that will have an impact at home." She framed the IMF's upgrade of its UK growth forecast to 1% as vindication of her "three big choices" on AI, regional growth, and EU trade.
On defence, she launched the Multilateral Defence Mechanism with the Netherlands, Finland, and Poland on July 7 for joint procurement, calling European defence procurement "too fragmented, expensive and slow," then proposed merging it with Canada's new Defence, Security and Resilience Bank with Gordon Brown leading talks. Her £15bn defence boost, funded by cutting capital budgets, drew fire from regional leaders and left a £4.7bn gap Kemi Badenoch called a "black hole."
Domestically, HMRC began adjusting tax codes to claw back Winter Fuel Payments from roughly 2 million pensioners earning over £35,000, which Reeves defended as "targeted and fair." She launched the Great British Summer Savings scheme, endorsed the FCA's crypto framework as "clear rules of the road," and dismissed Nigel Farage's Clacton by-election as a farce, quipping he could "spend the summer arguing with a bin."
On their plate
Reeves attributed May's flat or contracting GDP to the US-Israel-Iran war's impact on fuel and energy costs, framing external pressure as the primary driver of weak growth. She separately pointed to the IMF's upgrade of its UK growth forecast to 1% as vindication of her 'three big choices' on AI, regional growth, and EU trade.
Reeves launched the Multilateral Defence Mechanism with the Netherlands, Finland, and Poland on July 7 for joint procurement and off-balance-sheet stockpiling, calling European defence procurement 'too fragmented, expensive and slow.' She then proposed merging the MDM with Canada's Defence, Security and Resilience Bank, appointing Gordon Brown to lead discussions between the two sides.
HMRC began adjusting tax codes to recover Winter Fuel Payments from roughly 2 million pensioners earning over £35,000, with clawback rising from about £17/month in 2026-27 to £33/month in 2027-28. Reeves defended means-testing as 'targeted and fair,' calling the original decision 'tough but the right decision' given the inheritance from the previous government.
Reeves is widely expected to be removed as Chancellor when Burnham enters Downing Street, with Ed Miliband, Wes Streeting, and Shabana Mahmood named as contenders for her replacement. Burnham has indicated he will keep existing borrowing rules but will not offer Reeves a job, while signalling tax-policy flexibility that departs from her fiscal framework.
Reeves launched the Great British Summer Savings scheme cutting VAT to 5% on children's menus, cinema tickets, and attractions through Sept 1, plus free bus travel for children in August. She endorsed the FCA's new crypto regulatory framework as 'clear rules of the road' and dismissed Farage's Clacton by-election as a farce, with Labour joining a cross-party boycott.
Key relationships
Burnham is expected to remove Reeves as Chancellor and appoint Ed Miliband in her place, declining to offer her any role. He has signalled tax-policy flexibility that departs from the fiscal rules she enforced.
Badenoch attacked Reeves's defence spending plan for leaving a £4.7bn gap in the 2026 Budget, calling it a 'black hole.'
Reeves dismissed Farage's Clacton by-election as a farce, with Labour joining the cross-party boycott of the contest.
Reeves appointed Brown to lead discussions between the UK and Canadian sides on merging their respective defence financing institutions into a single new institution.
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