Don't axe Rachel Reeves! Markets issue deadly threat as 'moron' Starmer targets Chancellor

Yesterday, Keir Starmer publicly humiliated Rachel Reeves, and it wasn't a pretty sight. If he'd sacked her outright, it would almost have been kinder. Instead, he crowded her out.

Reeves hangs onto the title of Chancellor, but her authority has been ripped away. Her deputy Darren Jones has been spirited into No 10 to deliver policy. Baroness Minouche Shafik, a former Bank of England deputy governor, has been drafted in as Starmer's chief economic adviser.

Career Treasury mandarin Dan York-Smith has also been pulled into the fold. Together, they've turned Reeves into a puppet chancellor.

She'll still deliver the Budget this autumn, but others will be pulling the strings. And if her massive tax raid goes down poorly, as it surely will, they'll cut them.

Downing Street insists Reeves is friendly with her new minders and even welcomed the extra "firepower".

Yet the bond market isn't buying it. They know what's going on, and don't like it one bit.

The bond market matters more than ever today. That's where Britain goes to fund its humungous deficit.

This year, the UK will borrow a staggering £300billion. Half will cover everyday spending, while the other half involves rolling over existing debt as expires.

The interest we are charged on the debt is critical. After Starmer's reshuffle yesterday the rate spiked to 5.64%, the highest level in 27 years.

That's more than we paid under Liz Truss in 2022. And as I write this, gilt yields have jumped again to 5.69%.

In September, before Reeves's disastrous maiden Budget, 30-year gilt yields stood at just 4.35%. They've now climbed more than 30% in a year on Labour's watch. That's a massive movement for the bond market.

Germany pays a modest 3.3% on its 30-year bonds. Even France, now on the brink of a devastating financial crisis, only pays 4.4%.

Economists call this the "moron premium". That's the extra yield demanded by traders to buy the debt of countries it doesn't trust.

The misery doesn't end there, with the pound plunging too.

Investors have delivered their verdict on Starmer's machinations and it's damning. They reckon he's a fiscal moron. If gilt yields rise go much higher, it's game over.

Bond investors have no illusions about Reeves. But they've also examined her replacements. What they see is a tax-obsessed trio of establishment cronies without a growth strategy.

Shafik has glided through grand roles at the IMF, Bank of England and London School of Economics without distinction. She's long favoured new wealth taxes on property, pensions and inheritances.

Jones is remembered for comparing disability cuts to pocket money and helped to scrap the Winter Fuel Payment, for which Reeves carried the can. Treasury bod York-Smith has presided over 20 years of economic decline.

This is the team now shaping Britain's economic destiny. They believe Britain can tax its way to prosperity. Newsflash: it can't.

Reeves had started to grasp this fact. Last December, she pledged not to repeat last year's growth-crushing tax raid, before Starmer shut her down.

No markets fear the PM will backtrack on Reeves's supposedly "iron-clad" fiscal rules, and spend even more.

No wonder the bond market is flashing red. It fears the worst, but that won't stop Starmer. His truly awful government has taken us another step closer to financial meltdown.