No 10 isn’t working. That was the conclusion that despairing cabinet ministers drew when Labour assembled for its conference in Liverpool last month. The party’s supposed honeymoon period had been dominated by rows over “freebies” and winter fuel payment cuts, Keir Starmer’s approval ratings had plummeted and Downing Street itself was ever more dysfunctional. Starmer, senior Labour figures observed, had a capacity for ruthlessness. Would he exercise it once more?
The Prime Minister himself has now answered that question. Starmer’s critics had hoped that he would reshape his No 10 team before Christmas. But angered by weeks of dismal headlines, he has acted with greater speed.
Sue Gray, Starmer’s chief of staff, has been ousted after just 94 days in the role. Some had predicted her downfall from the moment Labour was elected in July. Starmer’s No 10, unusually, was dominated by two senior aides – Gray and Morgan McSweeney, his chief political adviser – who reported separately to the PM. It was a recipe for internal conflict – one that McSweeney, who masterminded Starmer’s selection as leader and Labour’s election campaign, was always likely to win.
But Gray’s position deteriorated faster than even sceptics anticipated. As I reported back in August, special advisers began unionising after discovering that they would be paid less than in opposition and/or less than their Conservative predecessors. “It’s not Sue vs Morgan; it’s Sue vs everyone,” aides would remark. As Gray learned, it’s hard to be chief of staff if the staff don’t like the chief. When her £170,000 salary – more than Starmer’s own – was leaked, outrage reached new heights. MPs from all wings of Labour alighted on the same word to describe Gray’s position: unsustainable. She had become the fixer who couldn’t fix.
By naming McSweeney chief of staff, Starmer has abolished No 10’s dual power structure and given his administration a more explicitly political stamp. One criticism long made of Gray was that, as a career civil servant, she reinforced Starmer’s technocratic tendencies rather than countering them.
The Prime Minister has sought to turn a crisis into an opportunity by reshaping his wider Downing Street team. Vidhya Alakeson, No 10’s political director, and Jill Cuthbertson, director of government relations, have been promoted to deputy chiefs of staff (the latter having served in Gordon Brown’s No 10). Nin Pandit, a former director of the Downing Street policy unit, has been appointed principal private secretary to Starmer – a critical civil service role unfilled till now.
Perhaps most notably, former Sunday Times and Daily Mirror journalist James Lyons will join No 10 from TikTok to lead a new strategic communications team. This is a concession to cabinet ministers and others who have complained that Labour has failed to tell an appealing story about itself. Crucially, Lyons will have responsibility for the Downing Street grid rather than Gray (accused of bungling Labour’s first “100 days” plan). Gray, meanwhile, will become envoy to the nations and the regions, a reflection of the positive relations she built with Labour’s devolved leaders and metro mayors.
It’s a reshuffle reminiscent of that which followed the party’s defeat in the 2021 Hartlepool by-election – the nadir of Starmer’s leadership. Back then, his director of communications Ben Nunn and his political secretary Jenny Chapman left his team (followed by deputy chief of staff Chris Ward weeks later). McSweeney, who had served as Starmer’s chief of staff, became Labour’s campaign director and Shabana Mahmood replaced Angela Rayner as national campaign coordinator. Though derided at the time as chaotic, the changes were ultimately deemed successful – Labour won the Batley and Spen by-election and its electoral recovery began.
Will history repeat itself? Stamer’s critics are satisfied that he has taken necessary action. But the government’s wider challenges won’t end with Gray’s departure from No 10. The most notable is the Budget, which falls on 30 October. Almost all of the tax rises planned by Rachel Reeves are mired in complications: the abolition of non-dom status and a new tax on private equity investors are under review over fears they would not raise any money. The imposition of VAT on private schools may be delayed beyond 1 January owing to administrative hurdles.
All are a reminder of one of the defining pledges Labour made: not to raise income tax, National Insurance or VAT (the taxes that account for almost two-thirds of government revenue). As a consequence, the government has become reliant on fiendish tax changes to produce new money for public services. While Reeves’s planned revision of her fiscal rules will give her freedom to borrow more for investment, this fundamental challenge will remain.
By historic standards, No 10 and No 11 are remarkably united. While Tony Blair and Gordon Brown’s teams represented rival courts, Starmer and Reeves’s are bound together. The Chancellor’s director of communications is Ben Nunn (who performed the same role for Starmer), her political secretary is Matt Pound, a key ally of McSweeney, and one of her parliamentary private secretaries is Imogen Walker, the MP for Hamilton and Clyde Valley and McSweeney’s wife.
But Starmer and Reeves will soon need to confront a shared dilemma: how will Labour raise the money needed for a “decade of national renewal”? The government’s early stumbles reflect the difficulty of governing in lean times. Winter fuel cuts were announced to raise scarce revenue and demonstrate toughness to the markets. Government freebies, as a result, became an even more irresistible target for the media.
By removing Gray, Starmer has attempted a swift course correction as his administration headed towards the rocks. Yet he has not answered the question that is beginning to haunt his government: what is Labour for? Sue Gray’s troubled tenure was a symptom of that problem – but it was not the cause.
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