Keir Starmer was scrambling to contain a growing crisis today after Rachel Reeves dramatically burst into tears during Prime Minister’s Questions.
The Chancellor was sitting next to Sir Keir as he was battered over his welfare surrender to Labour rebels.
In an extraordinary moment that spooked markets, tears appeared to roll down Ms Reeves’ cheek as Kemi Badenoch demanded a guarantee she would stay in No11.
The Prime Minister failed to provide that guarantee during the heated exchange.
Interest rates on 10-year and 30-year gilts spiked and the pound slipped sharply against the US dollar as the scenes unfolded.
Ms Reeves was seen being comforted by her sister Ellie – also a Labour minister – as she left the chamber.
Sir Keir did not speak to her as she departed.
A spokesman for the Chancellor insisted it was a “personal matter” and he would not be “getting into” the reasons.
Downing Street said the Chancellor “is going nowhere”, had not resigned, and retains Sir Keir’s “full backing.”
No10 and No11 both denied claims Ms Reeves had an argument with Sir Keir before they entered the Commons.
Sources suggest she broke down after being privately rebuked by Speaker Lindsay Hoyle for giving long answers during Treasury questions yesterday.
MPs believe Sir Lindsay only rebuked Ms Reeves for the lengthy responses, with the Speaker surprised she immediately became upset.
The pair had already exchanged words on the subject during yesterday’s session.
One MP told MailOnline: “There has been a major row before, just before she walked in. I think it was with Keir.”
However, both No10 and No11 denied any argument between Ms Reeves and Sir Keir occurred.
Just a year on from his election landslide, Sir Keir’s authority has been left in tatters after his surrender to avert defeat by Labour rebels.
Ms Badenoch said he had made “mistake after mistake”, highlighting volte faces over grooming gangs and winter fuel allowance.
She pointed to a visibly-upset Reeves, saying she looked “miserable” and was being used as a “human shield.”
This man has forgotten that his welfare bill was there to plug a black hole created by the Chancellor,” Ms Badenoch said.
“Instead they’re creating new ones. She looks absolutely miserable.”
Labour MPs are going on the record saying that the Chancellor is toast, and the reality is that she is a human shield for his incompetence.
The Conservative leader demanded: “In January, he said that she would be in post until the next election. Will she really?”
Sir Keir replied: “She certainly won’t,” referring to Ms Badenoch’s prospects.
Last night Sir Keir effectively tore up his benefits reforms, which had been due to save £5billion annually by Parliament’s end.
The package will now actually increase spending by £100million.
The move heaped misery on Ms Reeves, already struggling to fill a black hole that could amount to tens of billions of pounds.
Cabinet Office minister Pat McFadden warned this morning there would be “financial consequences.
He hinted the tax burden will need to rise again.
Ms Reeves has insisted Labour will stick to manifesto pledges of no hikes to income tax, employee National Insurance or VAT.
She has been adamant she will not break her “cast iron” fiscal rules.
But she refused to guarantee yesterday that the hated freeze in tax thresholds will not be extended.
Challenged afterwards why Sir Keir failed to give Ms Reeves a vote of confidence, the PM’s press secretary said: “He has done so repeatedly.
“The Chancellor is going nowhere. She has the Prime Minister’s full backing.”
He has said it plenty of times, he doesn’t need to repeat it every time the Leader of the Opposition speculates about Labour politicians.
After the session, Mrs Badenoch’s spokesman said “personal matter doesn’t really clear it up.”
“You normally tell people what the personal matter is,” he added.
Labour circles have been in frenzy over how the Chancellor will handle the crisis in the public finances.
One MP said: “She is in massive trouble. This government has lost control. It is the worst politics of anybody.
“Governments get this after four years, but we’re not even at one year.”
Rather than leaving the Commons immediately after PMQs as usual, Sir Keir remained on the estate for about two hours having meetings.
Deputy PM Angela Rayner is said to have brokered the deal with rebels, fueling speculation she is positioning to succeed Sir Keir.
Appearing on ITV’s Lorraine show, Ms Rayner insisted she did not want the top job, joking it would “age me by 10 years.
Told Sir Keir looked “tired” and “exhausted”, she said: “It’s a very challenging job.”
Despite humiliating manoeuvres, when the vote was held 44 Labour MPs still backed the fatal amendment.
The Bill cleared second reading stage by 335 to 260, with the rebellion growing to 49.
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