Sir Keir Starmer gave his full backing to Chancellor Rachel Reeves despite the UK’s economic woes and claimed productivity could be doubled by AI in less than five years.
He insisted that the Chancellor was doing a “fantastic job” despite the controversy over her autumn Budget and the Pound falling further in value on Monday, with the cost of Government borrowing hitting a new high.
The Prime Minister stressed that delivering economic growth is his Government’s No1 priority.
But the economy is currently flatlining with dark clouds in recent days from Sterling’s drop in value and the cost of UK borrowing rising which will hit the public finances.
The economic woes have sparked speculation that Ms Reeves could be replaced as Chancellor.
But Sir Keir bluntly dismissed the idea, while stopping short of confirming she would stay in the post for the next four-and-a-half years.
“Rachel Reeves is doing a fantastic job, she has my full confidence and she has the full confidence of the entire party,” he said after a keynote speech at Google’s AI campus in London.
“She was given an incredibly challenging task at the Budget because not only was the economy broken but we had a £20 billion black hole.
“I’m 100 per cent confident that we will get the growth that we need.”
His backing came hours before No10 confirmed that Ms Reeves would be Chancellor “for the whole of this Parliament”.
Asked why the Prime Minister had been unable to confirm whether her long-term future was secure, his official spokesman said: “You heard from the Prime Minister this morning.
“He was very explicit (that) he has full confidence in the Chancellor and he’ll be working with her in the role of Chancellor for the whole of this Parliament.”
The Tories deny they left a £20 billion black hole in the public finances and say they handed over the wider economy to the new Labour government in a good state.
They also sought to exploit his refusal to confirm Ms Reeves would be Chancellor for the whole Parliament.
Shadow Treasury minister Gareth Davies said: “Labour are trying to insist that everything is fine, but the fact that Keir Starmer has repeatedly refused to say whether Rachel Reeves will remain as Chancellor speaks volumes.
“The markets and businesses are watching, Labour promised stability and confidence but they have lost control. They must take action to reverse before this gets worse for families.”
Sterling fell another 0.5% to 1.214 US dollars on Monday, having last week hit its lowest level against the dollar since November 2023, with government borrowing costs rising ever higher.
UK government bonds, also known as gilts, continued to see 10-year yields hit fresh highs not seen 2008, up six basis points at 4.9%.
The yield on 30-year gilts also hit new 27-year highs, up five basis points at 5.5%.
The Chancellor returned from her trip to China as concerns swirled that the Government is in danger of failing to meet its own fiscal rules and will need to take action to remain on track, with the most likely step expected to be less public spending rather than tax rises.
Sir Keir is throwing the Government’s weight behind artificial intelligence, as well as other reforms such as to the planning system, in a bid to boost growth.
He dismissed claims that the AI revolution could take ten years to take hold.
“I don’t think it’s going to take five or ten years to double productivity, not for a moment,” he said.
“I’ve spent many many hours pushing this around with AI experts to test those propositions, and I’m absolutely confident that the timeframes that we are talking about are much, much shorter than that and that productivity is not sort of ten per cent increase in productivity, we are talking about many who say productivity will double in a very short period of time.”
Signalling US-style light regulations, rather than a more restrictive EU approach, for AI companies, Sir Keir promised to “remove the blockages that hold you back”.
He also pledged to speed up grid connections for AI companies and other steps to encourage them to the UK, as he pointed to plans to create AI-focused growth zones.