"The pound fell sharply on Tuesday, a move that is likely to increase pressure on the Prime Minister to shed light on his economic policy ahead of a make-or-break Budget in October.
On Monday, Sir Keir brought in three economic experts into his No 10 team – Darren Jones, Ms Reeves’s former deputy, Baroness Shafik, a former Bank of England deputy governor, and Dan York-Smith, who spent two decades in the Treasury.
Sterling dropped more than 1.2 per cent against the dollar to less than $1.34 just a day after the sweeping changes, while Britain’s borrowing costs hit their highest level since 1998 amid concerns Ms Reeves will be unable to balance the books.
"Asked whether the reshuffle of the Downing Street top team represented a weakening of the Chancellor’s authority, the Prime Minister’s official spokesman said: “No, and as I say, it reflects a strengthening of the relationship between the Prime Minister and the Chancellor, a determination to drive growth in the economy, a recommitment to our robust fiscal rules.”
“And obviously we said yesterday how the appointment of the Chief Secretary to the Prime Minister, he’s someone who has been involved in the work to stabilise the economy, invest in public services and an approach to the economy that drives inflation, drives borrowing down and that’s the best response to grow the economy...
The spokesman continued: “The Prime Minister and the Chancellor want the strongest possible team on the pitch to drive economic growth.”
The spokesman added Downing Street had an “iron-clad” commitment to the fiscal rules imposed by Ms Reeves since Labour took power in July 2024, before insisting Sir Keir and Ms Reeves were working together “in lockstep” on fiscal policy.
The pound was also the worst performer among the world’s major currencies on Tuesday, dropping 0.6 per cent versus the euro to €1.15.
The drop in the pound came just as the cost of Britain’s government borrowing surged to a 27-year high. The yield on 30-year UK gilts – a benchmark for the cost of servicing Britain’s national debt – climbed five basis points to 5.69 per cent.
Mel Stride, the Tory shadow chancellor, urged Sir Keir to expand on his plans for the economy. He told The Telegraph: “The markets are getting jittery. Businesses and investors need certainty now - not waiting months until the budget.”
Meanwhile, Kemi Badenoch, the Tory leader, accused Sir Keir of “shifting the deck chairs on the Titanic”.
Chris Beauchamp, chief analyst at stock broker IG, said rising borrowing costs “complicates matters enormously for the Government, in turn signalling that tax rises are coming in the autumn Budget”.
He said: “Ironically, of course, the situation now seems more ripe for austerity policies than in 2010, but the country as a whole will not take kindly to a government trying to cut spending at a time when so many are feeling the pinch of inflation.”"
From the Telegraph live blog