The decision to rip up plans for the Budget has left Keir Starmer even further “weakened” and more likely to face an imminent bid to oust him, Labour MPs have claimed.
Ministers and backbenchers reacted with despair to news that plans to hike income tax had been abandoned, claiming that is showed “nobody is in charge” of the government.
The Independent has been told that supporters of health secretary Wes Streeting still want him to replace Sir Keir in a coronation to get the Labour government back on track. One MP said the U-turn made a coup more likely while a minister described the PM’s position as “weakened”.
It is being claimed that Downing Street overruled the Treasury over the planned income tax rise in a bid to buy Sir Keir time and see off an attempted coup.
But the move may have backfired again with one senior minister complaining: “It has just added to the sense of directionlessness.” Another minister said: “It feels like nobody is in charge any more.”
Meanwhile, one minister despondently suggested that “the gilt markets are now in charge of the government.”
The decision on income tax was leaked to The Financial Times in the wake of a terrible week for Downing Street where sources briefed that Sir Keir was prepared to fight an attempted plot to replace him by Mr Streeting.
Economists have warned that what appears to be a political decision will mean that the government will not be able to build up a sufficient buffer to protect the UK from more economic shocks – leaving it even more exposed.
Instead, the government appears to be preparing to use a basket of smaller taxes – such as on gambling firms, banks and property worth £2 million or more – to fill an estimated £20bn spending black hole.
The chancellor will also reportedly freeze thresholds for an extra two years and is considering a new levy on high-value properties in the measures to be announced on November 26.
Mr Streeting has denied plotting to replace the prime minister, but the briefing – which was blamed on the controversial chief of staff Morgan McSweeney, which the prime minister denied – has “brought forward” the decision on whether to oust Sir Keir, sources have said.
One senior Labour figure said: “There are MPs now ready to move immediately after the Budget.”
Another source added: “Wes does not want to be seen as the one wielding the knife but he wants a coronation.”
The calculation being made by some MPs is that if Sir Keir holds on until the May devolved elections in Scotland and Wales, and council elections in England, then other rivals may have positioned themselves for a leadership bid.
This could include Manchester mayor Andy Burnham getting a seat in Parliament and former deputy prime minister Angela Rayner having sufficient time to recover from the tax scandal which forced her to quit.
One veteran Labour MP said Sir Keir’s leadership “was dead well before this U-turn. They just didn’t realise it”. They added: “Now they do, I really fear what they will do to hang on. I fear it will do irreparable damage.
“This is what the crisis of democracy looks like. To be honest whoever was in power would have faced it. But clearly some political projects will face the turbulence better than others. This one is sinking without trace with all hands aboard.
“Clearly Wes is busy pushing colleagues out of the way and heading for the lifeboat. Alas he’ll find it too is on fire and holed.”
Meanwhile, allies of new deputy leader Lucy Powell, who was elected to replace Ms Rayner on an anti-Starmer ticket, “is proving to be a real handful” for Downing Street.
Allies point to the fact that the decision on income tax came just days after she made an intervention warning against the party breaking its manifesto promise and increasing it or VAT or employee national insurance contributions.
However, the move has also been seen as a sign that the beleaguered chief of staff Morgan McSweeney still wields power despite many MPs demanding his resignation.
Mr McSweeney and welfare secretary Pat McFadden are said to habe led the internal opposition to the income tax hike warning about the potential breach of trust with voters – even with a drop in national insurance in a so-called “two up, two down” policy to raise £6bn.
Sir Keir claimed that he had been “assured” nobody in Downing Street was responsible for the briefing against Mr Streeting. But this has led to claims from MPs that he is “too weak” to sack Mr McSweeney.
One MP said: “If he can’t sack McSweeney then he clearly has lost control.”
