Wes Streeting is expected to make the economy a new front in his leadership campaign, with allies accusing Rachel Reeves and Sir Keir Starmer of lacking ambition on growth.
The former Health Secretary will make an intervention int the King’s Speech debate on Tuesday and will begin to set out his policy platform in the coming days.
Allies say this will include laying out the argument for a “bolder growth agenda”, although he will not challenge the Chancellor’s iron-clad fiscal rules.
Andy Burmham, the Mayor of Greater Manchester, has also said that he would maintain the Chancellor’s fiscal rules despite previously suggesting that he would make defence spending exempt.
Reeves’ two key rules require her to push the current budget into surplus by 2029-30, and that debt must decline as a share of the economy by that year.
Streeting has confirmed that he will run to replace Starmer if a leadership contest in triggered. He used a speech at a conference organised by the thinktank Progress on Saturday to criticise what he described as Starmer’s “heavy handed” leadership culture, which he claimed had stifled creative policy thinking in Government.
No 10 ‘too insular looking’ allies say
However now his allies appear to have turned on Reeves’ economic strategy.
A source close to Streeting said: “There has been this sense for months that somehow Rachel Reeves is the great protector of the bond markets and she has been staving off all these attacks on it from mad left-wing MPs.
“In the most case these are not left-wing MPs and are in the mold of the current leadership, but they are also a group of intelligent people coming with ideas that deserve a hearing.”
Streeting’s allies also claim he is frustrated that Starmer has not been bold enough and has not been open to new ideas. “He thinks that No10 have been too insular and inward looking,” a source said.
“For example, on banning social media for under-16s, that is an idea that many Labour MPs could have got behind but instead we allowed the Conservatives to steal a march on it and it now looks as if we are opposing a popular policy that one of our MPs (Josh McAllistair) came up with.”
The development comes as the International Monetary Fund warned that any potential new Labour Prime Minister will need to control rising welfare spending and stick with the deficit reduction plans in the current fiscal rules or risk a market revolt.
IMF says fiscal rules crucial to UK ‘credibilty’
It also said the current fiscal ruleswere also crucial to Britain’s “policy stability and credibility,” adding: “Staying the course on deficit reduction will be important given market pressures and elevated implementation risks.”
The global monetary watchdog also upgraded its forecast for the UK’s growth this year but warned the Iran war and “domestic uncertainty” could hit the economy.
The growth estimate has been upgraded to 1 per cent from 0.8 per cent for 2026 by the influential body, which said last month that the UK would be hit hardest by the Iran war among the world’s most advanced economies.
Starmer could face a leadership challenge within weeks, if Andy Burnhamm the Mayor of Greater Manchester, is selected to stand as the Labour candidate, and then wins, the Makerfield by-election.
Other candidates on the soft left of the party, such as Angela Rayner, the former Deputy Prime Minister, and Ed Miliband, may also join the race.
Some investors are concerned that a more leftwing Labour government could loosen the UK’s self-imposed borrowing limits.
Yields on 10-year UK government bonds hit their highest level since 2008 on Friday as traders priced in a greater likelihood that Burnham would challenge Starmer for the Labour leadership.
In a bid to calm the markers, Burnham told ITV over the weekend: “Let me say this really clearly. I support the fiscal rules, there needs to be a plan to get debt down.”
Burnham has previously proposed excluding defence spending from the fiscal rules. He has also said he would take utilities back into public ownership and proposed cutting the basic rate of income tax to 10 per cent for the lowest earners, and raising it to 50 per cent for the highest earners.
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