Starmer reshuffle after Rayner resignation shakes Labour top team

What triggered the crisis

Angela Rayner’s resignation blew a hole in the heart of Keir Starmer’s government and set off a chain reaction across Whitehall. The deputy prime minister, housing secretary, and deputy leader of the Labour Party stepped down after the government’s standards adviser, Sir Laurie Magnus, found she breached the ministerial code over stamp duty on a flat she bought in Hove.

Rayner accepted that she had not paid enough stamp duty at the time of purchase. She says she followed advice that the Hove flat counted as her only home because the family house in Ashton-under-Lyne sits in a trust for her disabled son. HMRC rules are stricter than many people think: if you already own or partly own a property—even via certain trusts—you can be hit by the higher 3% surcharge on additional homes. Magnus’s finding left little political room. Rayner went.

The resignation matters far beyond a tax technicality. Rayner was Starmer’s closest political ally and a key bridge to Labour’s grassroots. She brought clout in the North and credibility with the party’s left and trade unions. Losing her at Housing also creates a policy gap in a brief the government has pitched as central to growth, planning reform, and renters’ rights.

Inside No 10, the priority was to contain the shock. A quick reset followed: a broad reordering of the top team to show grip, keep markets calm, and send signals about where power now sits in the government. The result is the most sweeping shake-up of this parliament so far—the Starmer reshuffle touches 12 ministers and several departments.

The reshuffle: winners, losers and the policy pivot

There’s a clear pattern: steady hands at the Treasury, tighter control over welfare and skills, and a politically risky but decisive move at the top.

• David Lammy leaves the Foreign Office to become justice secretary and deputy prime minister. He had been promised the foreign secretary brief for the full parliament, building ties with Washington—including Donald Trump and deputy JD Vance—and key European capitals. This is a personal setback but puts him at the core of domestic decision-making and the day-to-day running of government.
• Rachel Reeves stays as chancellor. No 10 wanted zero ambiguity on economic policy to avoid spooking investors. With growth stagnant and a fiscal statement due later this year, continuity at the Treasury is the anchor of the whole reshuffle.
• Ellie Reeves is sacked from the Cabinet and removed as Labour Party chair. She is the sister of the chancellor; the move underlines that family ties don’t buy protection and signals that Starmer is willing to act ruthlessly close to home.
• Ian Murray is removed as Scotland secretary. With the SNP weakened but still dominant at Holyrood, Labour needs a fresh approach. A reset in tone and personnel is coming for Scotland.
• Lucy Powell is out as leader of the Commons. Parliamentary management has been a headache; expect a tougher, more disciplined operation in the House.
• Liz Kendall and chief whip Sir Alan Campbell are moved after botched welfare reforms. The government is trying to steady a sensitive area that affects millions and drives budget risks.
• Pat McFadden is handed a “super-charged” growth department spanning benefits, pensions, and skills. Folding these briefs together concentrates power over the welfare state and workforce policy in one place—an unmistakable hint of tighter controls and possible savings to come.
• Ed Miliband stays on as net zero secretary. Starmer is keeping the green agenda intact, wary of provoking the party’s left and keen to signal stability on climate and energy investment.

The Lammy move is the biggest call. Pulling a foreign secretary back into a domestic role is unusual mid-parliament. It leaves open questions about Britain’s foreign posture at a time of rolling crises and trade diplomacy. No 10 had not confirmed a permanent replacement at the Foreign Office by the time of writing, and allies will watch closely for continuity on Ukraine support, European security, and UK-US ties.

Reeves’s survival at the Treasury is the least surprising element. Markets hate surprises, and Labour has spent years promising fiscal discipline. By nailing the chancellor in place, Starmer is telling investors that tax and spending plans will not lurch with the political weather. Expect the Treasury to double down on “stability first” language as the government navigates tight public finances.

The welfare pivot is the most consequential structural change. Putting benefits, pensions, and skills under McFadden creates one command post for three levers that shape both the labour market and the deficit. Recent missteps on welfare showed how quickly policy can backfire when communications stumble or delivery lags. Centralising oversight suggests a tougher gatekeeping role on spending and conditionality, and a push to link training with work incentives. The politics are delicate: reforms must look firm but fair, and any hint of cuts will trigger pushback from Labour’s base and civic groups.

Ellie Reeves’s removal was eyebrow-raising even inside Labour. Firing the party chair while her sister remains the chancellor is a display of steel from Starmer. The message: competence first, loyalty second. It also neutralises any whisper of favouritism at the top of the government.

Scotland is a strategic headache that can’t be ignored. Ian Murray’s exit suggests a new plan for a country where Labour wants to rebuild trust without reigniting constitutional wars. Expect closer coordination with the growth and net zero agendas—energy jobs, investment corridors, and infrastructure—to compete with the SNP on delivery rather than identity.

Keeping Ed Miliband in place is a calculated choice. It reassures activists who see climate policy as the signature promise of this government. It also keeps continuity with energy markets that are already planning around the UK’s net zero pathway. Dropping Miliband would have looked like panic and risked a revolt on the party’s left.

The political consequences of Rayner’s decision reach straight into the Labour Party’s internal machinery. Her exit as deputy leader—an elected post—forces a contest. That vote is not a small matter: the deputy leader sits on the top table, shapes campaign tone, and has a direct line to members and unions. Under Labour’s one-member-one-vote system, members and affiliated supporters will have the final say. The field is still forming, but the stakes are clear. The left wants a standard-bearer. The leadership will look for someone aligned with the government’s tight discipline. It could become a proxy fight over Labour’s future direction.

For Starmer, the danger is obvious: a deputy leader chosen by the membership can cut across the Downing Street line. Past leaders have lived with that tension; few enjoy it. The opportunity, though, is to reset the partnership at the top and bring in a deputy who can front the domestic agenda while Lammy manages justice and the rhythms of government.

Is this a crisis? Government officials reject the label, but the facts are stark: a close ally has fallen, a dozen ministerial changes have been rushed through, and the political weather has turned gusty. The next few weeks will test whether this reshuffle looks like strength or scramble. If the new team lands a clean economic message, calms welfare politics, and fills the housing brief with authority, the government can regain momentum. If not, the tax row will become a story about judgment and control.

Markets will watch Reeves; the City wants predictability on borrowing and a credible plan for growth. Public services will watch McFadden’s new department; workforce shortages and skills gaps won’t fix themselves. Party members will watch the deputy leadership contest; it will set the tone for conference season and decide who gets to speak for Labour when the leader is elsewhere.

Opponents smell blood. Conservatives will hammer away at integrity and competence. Smaller parties will argue that the promise of clean government has met the reality of power. Much depends on how quickly Rayner’s tax issue fades from the headlines and whether No 10 can present this reshuffle as a purposeful reset rather than a forced retreat.

Two things are certain. First, budget and welfare choices will define the rest of this year. Second, the deputy leadership race will shape the Labour family’s balance of power for years. Starmer has chosen control over caution. Now he has to show it works.