Rachel Reeves will stay on as chancellor for the whole of this parliament, Downing Street has clarified after the prime minister refused to guarantee her future.

Earlier on Monday, Sir Keir Starmer said he had “full confidence” in his colleague, but would not be drawn on whether she would stay in post until the next general election.

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His official spokesperson has now said the pair will work together “throughout the whole of this parliament”.

Pressed if that meant working together with Ms Reeves as chancellor, the spokesman replied: “Yes.”

He said: “The PM was explicit this morning. The chancellor is doing a fantastic job and will work throughout the whole of this parliament in delivering for working people, and has [the PM’s] full confidence.”

Ms Reeves is under pressure after the cost of long-term borrowing rose to its highest level in decades while the value of the pound has slumped.

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After delivering a speech on AI this morning, Sir Keir was asked twice if she will remain in Number 11 for the duration of this parliament and did not explicitly answer.

He said: “Rachel Reeves is doing a fantastic job. She has my full confidence. She has the full confidence of the entire party.”

Referring to the October budget, in which she announced tax hikes and spending cuts, Sir Keir said she was “right” to take tough decisions, accusing the Tories of leaving behind a £20bn black hole.

Prime ministers are often reluctant to give guarantees about the futures of individual Cabinet members as they need to have flexibility to respond to events and reshuffle their team.

But Downing Street has previously indicated that Foreign Secretary David Lammy would serve for the duration of the parliament,

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Conservative Party leader Kemi Badenoch claimed the prime minster had “refused to back his chancellor staying in her job”, and said the Labour government had “driven Britain’s economy into the ground”.

She wrote on X: “The markets are in turmoil and business confidence has crashed, yet the chancellor is nowhere to be seen.”

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.”

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Mounting market pressure from last week continued to grow on Monday, as government borrowing costs rose to highs not seen in decades and the pound value fell to a near 15-month low.

Not since mid-1998 has long-term borrowing been so expensive for the state. The effective interest rate – known as the gilt yield – on 30-year government debt rose to 5.47% on Monday morning before easing off slightly to 5.4%.

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The benchmark 10-year borrowing cost stayed below the 2008 high recorded last Thursday but at 4.86% remains at levels that had been last recorded around the global financial crash.

The pound, which can reflect investors’ confidence in the UK and overall economic health, dropped to be worth $1.21, a low last recorded in mid-October 2023.

Kathleen Brooks, research director at XTB, said worries over UK government debt levels will not go away until ministers announce measures to address it.

PM doesn’t rule out spending cuts

Sir Keir has stressed that the government will still stick to its “fiscal rules”, which include requiring day-to-day spending to be met from revenues rather than further borrowing.

But meeting the rising cost of government borrowing eats into the funding available, which could force Ms Reeves to either reduce spending or raise taxes.

Sir Keir did not answer directly when Sky’s political editor Beth Rigby asked if he will have to implement cuts.

Downing Street later said “nothing is off the table” when it comes to making government departments run more efficiently.

“The public would rightly expect that every pound of taxpayer money is being spent as efficiently as possible,” the prime minister’s spokesman said.

“We can’t operate in a business as usual way when it comes to tackling waste – nothing’s off the table.”

Asked if this included the benefits bill, he said: “Absolutely, there’s nothing off the table when it comes to delivering value for money for taxpayers.”

Calls for emergency summit

Official figures due on Wednesday are set to show another rise in UK inflation, which could add to the pound’s troubles,and there are worries over a knock-on effect on mortgages and pensions.

The Lib Dems have urged the chancellor to hold an emergency summit with lenders to reassure mortgage holders.

The party’s Treasury spokesperson Daisy Cooper said the October budget “has not worked” and “many will be worried”.

“Rachel Reeves can no longer sit on her hands as this turmoil threatens to have real consequences for millions of homeowners,” she added.

Ms Reeves has said she will not alter her economic plans, with the October budget designed to return the UK to economic stability.