LONDON, ENGLAND – AUGUST 14: British Prime Minister Keir Starmer speaks during a VJ Day reception at Downing Street on August 14, 2025 in London, England. The Prime Minister is hosting veterans, historians, and school children during the reception to mark the 80th anniversary of Victory over Japan Day, or VJ Day, which commemorates the announcement of Japan’s acceptance of the terms of the Potsdam Declaration on August 15, 1945, effectively bringing WWII to an end. (Photo by Alberto Pezzali – WPA Pool/Getty Images)
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Smoke signals came out of U.K. Prime Minister Keir Starmer’s office in Downing Street this week, after a shake-up in his and Finance Minister Rachel Reeves’ top advisory teams. Analysts now say the move mark an urgent attempt to boost the government’s economic credentials ahead of a tricky Autumn Budget.
Among the most prominent shifts were the appointment of the Bank of England’s former Deputy Governor Minouche Shafik as Starmer’s chief economic adviser. Starmer also moved Darren Jones — who was previously effectively Reeves’ deputy — Downing Street to become the PM’s chief secretary.
The operations shake-up has been widely interpreted as a humiliation for Reeves and a bid by Starmer to get things moving for a government that has promised to deliver change and economic growth for the British people. It also comes as the government’s approval rating wallows at 13% (with 67% of respondents disapproving), according to YouGov data.
The next big test for Starmer and Reeves comes later this fall, with the release of the the next Autumn Budget that sets out plans for the economy, taxation and spending.
After outlining wide-ranging public spending plans and announcing fiscal rules on reducing debt and constraining borrowing, Reeves is widely expected to raise taxes in her bid to stick to her self-imposed fiscal rules and balance the budget.
Market jitters over the Treasury’s ability are clear, however, with the yield on the U.K.’s 30-year gilt on Tuesday rising to 5.7% — its highest level since 1998.
Higher yields reflect shaky investor confidence and mean the government must pay more to service its debt, piling more pressure on the Treasury.
Challenging times ahead
Describing the reshuffle of Downing Street’s top team as a reflection of the PM’s “frustration at what he sees as a bloated but slow civil service machine and a desire to bolster Number 10’s heft on the economy,” Eurasia Group’s Mujtaba Rahman said Starmer faces a “very challenging autumn.”
The shake-up, Rahman stressed in emailed comments Monday, was “a belated recognition that Starmer delegated too much power to Rachel Reeves, whose political judgement was lacking on means-testing the pensioners’ winter fuel allowance and welfare cuts — both later abandoned.”
In order to avoid an adverse reaction in the financial markets, Eurasia Group said Reeves would look to stick to Labour’s manifesto pledges to not raise income tax, national insurance for employees or VAT, as well as to her fiscal rules.
Britain’s Prime Minister Keir Starmer meets with Britain’s Chancellor of the Exchequer Rachel Reeves, days before the announcement on the first budget of the new Labour government, at Downing Street on October 28, 2024 in London, England. Starmer and Reeves are meeting ahead of the Budget on Wednesday.
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But Reeves is highly likely to “increase a raft” of other taxes, Rahman said, including the potential move to a “fair tax” system — previously endorsed by Minouche Shafik — particularly higher taxes on the wealthy.
“As well as ‘fair tax,’ Reeves’s Budget theme will be for everyone to make a ‘contribution,’ with the wealthy paying more tax and ordinary people getting better rewards,” Rahman said.
The bond market tremors on Tuesday will be food for thought for the Treasury and are seen as a warning shot, as Reeves weighs what Nigel Green, chief executive of the financial consultancy deVere Group, described as “politically explosive choices” over taxation and spending.
“The markets are making their view brutally clear,” Green said in emailed comments Tuesday.
“The message from the bond market is the same as the one that humiliated [former Prime Minister] Liz Truss: fiscal credibility cannot be faked. Reeves will have no choice but to deliver tough measures — either tax rises, spending cuts, or both — if she wants to prove that Britain’s debt can fall in line with her fiscal rules.”
