Sir Keir Starmer’s government faces unprecedented turmoil as Investment Minister Baroness Poppy Gustafsson prepares to resign less than a year into her role, dealing a fresh blow to the Prime Minister just hours after his deputy Angela Rayner quit over a £40,000 stamp duty scandal.
The departures mark the most significant crisis facing the Labour government since taking power in July 2024, with both ministers citing personal circumstances for their resignations. Baroness Gustafsson is expected to step down formally today, whilst Ms Rayner submitted her resignation on Friday morning after an ethics probe found she breached the ministerial code.
The dual resignations have triggered an emergency cabinet reshuffle and raised serious questions about the stability of Sir Keir’s administration, which has already seen his popularity plummet to historic lows just over a year after winning a landslide victory.
Gustafsson’s Swift Exit from Investment Role
Baroness Gustafsson, 43, is understood to be leaving to spend more time with her young family, according to sources close to the minister who spoke to Sky News. The Cambridge-based entrepreneur was appointed to the House of Lords specifically to take up the investment minister role in October 2024.
Her departure represents a significant loss of business expertise from the government frontbench. The former Darktrace chief executive was one of the only ministers with substantial private sector experience, having co-founded the cybersecurity firm in 2013 and led it to a London Stock Exchange listing in 2021.
The company was subsequently sold to private equity group Thoma Bravo for £4.3 billion last year, shortly before Gustafsson entered politics. She was awarded a CBE in the 2025 New Year’s Honours for services to cybersecurity.
Upon her appointment less than eleven months ago, Baroness Gustafsson had expressed enthusiasm for the role, stating: “It is a huge privilege to be appointed as the Minister of Investment and I am excited to get started. I have first-hand experience of building and scaling a business here in the UK and I am thrilled to have the opportunity to share with the international investment community what I already know to be true; the UK is a great place to do business.”
Shadow Minister Claims “Constructive Dismissal”
Shadow Business Secretary Andrew Griffith said the news of Gustafsson’s departure came as “zero surprise” and suggested she had grounds for “constructive dismissal.
Writing on social media platform X, Griffith stated: “Poppy has a decent claim for constructive dismissal given Labour’s attacks on wealth creators, higher taxes and exodus of international investors since day one.
The phrase “sinking ship” was invoked by political commentators as the government faces mounting pressure over its economic policies and approach to business investment.
Baroness Gustafsson’s resignation comes at a critical time for the government’s investment strategy. She had been responsible for applying an investor lens to government policymaking and ensuring investment-related decisions supported the growth mission across both the Department for Business and Trade and HM Treasury.
Rayner’s £40,000 Stamp Duty Scandal
The investment minister’s departure follows the dramatic resignation of Deputy Prime Minister Angela Rayner, who quit after admitting she underpaid stamp duty by £40,000 on an £800,000 seaside flat in Hove.
Ms Rayner, 45, who also served as Housing Secretary, referred herself to the independent adviser on ministerial standards after revelations about her complex property arrangements involving a disabled son trust emerged in the press.
The controversy centred on Ms Rayner transferring her stake in her family home in Ashton-under-Lyne, Greater Manchester, into a trust for her disabled son before purchasing the Hove property. She believed this meant she was not liable for the higher stamp duty rate reserved for second homes.
Independent ethics adviser Sir Laurie Magnus concluded that whilst Ms Rayner had acted “in good faith,” she had broken the ministerial code by failing to seek specialist tax advice despite being cautioned by her solicitors to do so.
“She believed that she relied on the legal advice she had received, but unfortunately did not heed the caution contained within it, which acknowledged that it did not constitute expert tax advice and which suggested that expert advice be sought,” Sir Laurie wrote in his report.
“Deeply Regret” Tax Error
In her resignation letter to the Prime Minister, Ms Rayner said: “I deeply regret my decision to not seek additional specialist tax advice” and took “full responsibility for this error.
The resignation is particularly damaging given Ms Rayner’s vocal stance against tax avoidance and her position as Housing Secretary at the time of the property purchase. She had paid £30,000 in stamp duty instead of the £70,000 required, believing she was eligible for the standard rate.
Tax experts said the new property could not be treated as her only residence because of the nature of the trust arrangements. Ms Rayner now faces a potential fine of up to £12,000 from His Majesty’s Revenue and Customs.
Just 48 hours before her resignation, Sir Keir had stood by his deputy at Prime Minister’s Questions, declaring he was “very proud to sit alongside her” amid calls from Conservative leader Kemi Badenoch for her resignation.
Vandalism at Rayner’s Hove Property
The scandal took an ugly turn on Thursday when Ms Rayner’s flat in Hove was targeted by vandals. The words “tax evader” and “bitch” were daubed on a white wall outside the property, with construction chipboard across from the building bearing the phrases “Tax evader Rayner” and “Rayner tax avoidance.”
A Downing Street spokesperson said Sir Keir “condemns this vandalism in the strongest possible terms,” adding: “Whatever scrutiny our parliamentarians may face, it is appalling that their private homes should be targeted in this way.”
Brighton and Hove City Council leader Bella Sankey called the vandalism “vile, sexist criminal damage,” confirming police were investigating the criminal act.
Political Fallout and Leadership Vacuum
Ms Rayner’s resignation creates a significant leadership vacuum within Labour, as she also quit as deputy leader of the party, a position elected by party members rather than appointed by the Prime Minister.
This means a potentially divisive leadership contest could emerge, with concerns among Starmerites that a left-wing candidate could win the role and deepen divisions between the left and right of the party.
It’s really bad,” one party insider said of the looming deputy leadership contest, expressing worries about the timing ahead of Labour’s autumn conference.
The dual resignations come as Nigel Farage kicks off Reform UK’s annual party conference in Birmingham, with the timing threatening to overshadow Labour’s attempts to reset its political agenda.
Prime Minister’s Response
In responding to Ms Rayner’s resignation, Sir Keir wrote in a rare handwritten letter that he was “very sad” to lose her from government, calling her a “true friend” with whom he had “nothing but admiration.”
“Although I believe you have reached the right decision, it is a decision which I know is very painful for you,” the Prime Minister wrote. You have given your all to making the Labour Government a success and you have been a central part of our plan to make Britain fairer for working families.
The Department for Business and Trade declined to comment on Baroness Gustafsson’s expected departure when contacted by media outlets.
Cabinet Reshuffle Expected
The twin resignations have triggered what sources describe as a wider ministerial reshuffle, with announcements expected throughout Friday. Chancellor Rachel Reeves is expected to remain in post, but other positions are now in question.
The crisis represents the most serious challenge to Sir Keir’s leadership since taking office, with his government already facing criticism over anaemic economic growth, rising criticism from both left and right, and historically low popularity ratings.
Ms Rayner’s departure is particularly significant given her working-class background and appeal to traditional Labour voters. The former teenage mother from Stockport was seen as a vital counterweight to Sir Keir’s perceived centrist conservatism and a key figure in defending against the rising working-class anger being harnessed by Reform UK.
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Image Credit:
Prime Minister Keir Starmer hosts Council of Nations and Regions (23 May 2025) — photo by Lauren Hurley / No 10 Downing Street, OGL 3.0
