Tears and turmoil as PM forced to defend Reeves after welfare fiasco

Starmer tries to soothe jittery markets with vow to support chancellor

- Pippa Crerar Rowena Mason Jessica Elgot

Keir Starmer was forced to defend his chancellor yesterday after the bitter recriminations over Labour's welfare bill fiasco left Rachel Reeves in tears and the financial markets in turmoil.

Ministers warned of long-lasting implications for the government's spending priorities after it was forced to abandon the central plank of its welfare changes to prevent a damaging defeat by rebel MPs.

Already under pressure, Reeves was accused of political misjudgment for trying to force through cuts in the face of deep backbench unhappiness. As a result of the U-turn, the chancellor now has to fill a £5bn gap in the public finances with tax rises or other cuts.

After she was seen in tears at prime minister's questions, Downing Street moved quickly to insist she would stay in post and had not offered her resignation. "The chancellor is going nowhere," a spokesperson said.

But borrowing costs rose more sharply than they had since Donald Trump's tariff plans unsettled financial markets in April, while the pound fell against the dollar and the euro, settling only once No 10 had said Reeves would stay. Pat McFadden, the Cabinet Office minister, said yesterday morning that tough choices would need to be made as a result of the welfare bill row. "There's definitely a cost to what was announced yesterday, and you can't spend the same money twice, so more money spent on that means less for some other purpose," he said.