Starmer rivals prepare to challenge weakened prime minister

(Bloomberg) — Keir Starmer’s efforts to hold back a potential leadership challenge showed new cracks, as allies of leading Labour Party rivals signaled they were ready to challenge him for the prime minister’s job.

Starmer’s former No. 2, Angela Rayner, indicated on Thursday that she was preparing for a bid to lead the governing Labour Party after announcing she had been cleared by a tax probe. The prime minister’s supporters had been expecting Health Secretary Wes Streeting to quit the Cabinet and declare his own challenge.

Whether Streeting had enough support to launch a bid was the subject of furious speculation on Thursday, with an ally of his saying they had the secured the necessary 81 nominations, without producing the names. Still, a Rayner supporter countered that Streeting had been seeking backers from among their camp, something a representative for the health secretary denied.

Government spokesman Tom Wells said that Streeting remained health secretary as of Thursday morning and still had Starmer’s “full confidence.”

The developments push Britain closer toward a messy and drawn-out contest for the country’s top political job at a time of growing economic uncertainty. Investors have been demanding increasingly high yields on government debt in recent days, due in part to concern that the instability will result in a government less committed to fiscal discipline than Starmer’s has been.

Gilt yields retreated further from an 18-year high reached earlier this week, leaving 10-year government borrowing costs four basis points lower at 5.02%. The gains mirrored a move across global government bond markets, which are closely tracking fluctuations in oil prices.

The pound was 0.1% lower on the day against the dollar at $1.3511.

While the prime minister has long been dogged by historically low approval ratings and questions about his appointment of Peter Mandelson as ambassador to the U.S., plots to oust him accelerated in the wake of disastrous local elections last week. The results convinced many in the Labour Party that Starmer doesn’t have a plan to counter populist rivals such Nigel Farage’s Reform U.K. and Zack Polanski’s Greens.

Any leadership battle could take months, consuming the government’s attention at a time when the U.K. is already struggling with slow growth, weak employment and rising inflation as a result of war in Iran. Contenders would have to win the nomination of enough Labour MPs as well as the backing of a proportion of the party’s local branches or affiliated organizations, before progressing to a ballot of paying members, who now number fewer than 250,000.

Chancellor Rachel Reeves warned Thursday morning that economic stability should not be put at risk “by plunging the country into chaos” with a leadership fight. It came after new economic data showed gross domestic product grew 0.6% in the first quarter: a jump from the 0.2% in the previous three months and the fastest expansion for a year.

Starmer forestalled revolt at a high-stakes Cabinet meeting on Tuesday in which he refused to allow the topic of his future onto the agenda. He vowed to fight on, despite more than a fifth of Labour members of Parliament, including at least two other Cabinet ministers, urging him to step aside.

Rayner’s re-emergence into the field of potential rivals puts pressure on her main rival among the Labour left, Greater Manchester Mayor Andy Burnham, to show he has a viable path back to Parliament. Burnham needs to find a vacant seat — and secure the Labour Party’s blessing to seek it — a process that would take months, even if Starmer agreed to facilitate it. While Burnham’s allies insisted earlier this week that an MP was willing to step aside for him, a number of Manchester MPs have publicly denied they’re planning to do so.

Burnham and Rayner’s struggles have seen Energy Secretary Ed Miliband rise higher in prediction markets in recent days, as the party’s so-called soft left searches for a possible standard-bearer. Miliband led the party for five years before losing the 2015 general election to David Cameron’s Conservatives.

Another MP said to be contemplating a run was Armed Forces Minister Al Carns.

Rayner is prepared to run in a leadership contest, a person familiar with her thinking said on Thursday. She told the Guardian newspaper that she would “play my part” and urged Starmer to “reflect on” stepping aside.

The premier’s former deputy indicated she wouldn’t be the one to spark a contest, telling ITV: “I’ve said that I would not trigger the prime minister.” She told the broadcaster that she wouldn’t make a deal with rivals such as Burnham. “I’m not doing deals or anything like that,” she said.

It shows the soft-left faction of the Labour party is split on who should represent them in a race. Though most would prefer Burnham, if he’s unable to enter Parliament, Labour MPs expect a number of colleagues to throw their hat into the ring, likely splitting the vote.

Rayner was cleared by the British tax authority, HM Revenue & Customs, of carelessness or deliberate wrongdoing and has settled £40,000 ($54,000) in unpaid stamp duty, a spokesperson for Rayner said. She hasn’t had to pay a penalty as a result of the probe into the taxes paid on the purchase of a second home in southern England, the spokesperson said.

Meanwhile, allies of Streeting, who hails from the right wing of the party, said on Wednesday that the health secretary was likely to quit his post this week and launch a bid to replace Starmer as Labour leader. The prime minister’s own supporters affirmed his determination to contest any attempt to unseat him.

Starmer’s pledge to defend his job puts pressure on Streeting to show he can secure the 81 nominations necessary to trigger a contest. The Streeting ally, who asked not to be named discussing internal deliberations, said things were shifting and that they expected more Cabinet ministers to tell Starmer he should go.

However, people familiar with six Cabinet ministers’ thinking, including some close to Streeting, said they would not tell the prime minister to step aside.

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—With assistance from Louise Moon, David Goodman, Julian Harris and Alice Gledhill.