Reeves to Use Last City of London Outing to Warn on Government Spending

Rachel Reeves will issue a coded warning to the next Labour government by telling a City of London audience on Tuesday night that plans to boost the economy will only succeed with the support of financial markets.

(Bloomberg) — Rachel Reeves will issue a coded warning to the next Labour government by telling a City of London audience on Tuesday night that plans to boost the economy will only succeed with the support of financial markets. Shaking up the economy to encourage growth and investment “is only possible if we maintain the credibility that we have earned, and the stability that we have built,” the Chancellor of the Exchequer is expected to tell an audience of senior finance and business figures.

Her speech at the annual Mansion House dinner, which is hosted by the City of London Corporation, is likely to be interpreted as a warning to Andy Burnham, who is due to replace Keir Starmer as prime minister next week, and is widely expected to name a new chancellor. Burnham caused jitters last year when he referred to the UK being “in hock” to the bond markets, but he has since moved to reassure investors, committing to Reeves’ constraints on spending and borrowing. The speech will be her third address at the Mansion House, with the first just after Labour under Starmer swept to a landslide victory in the 2024 general election.

Reeves and the new Labour government at first enjoyed high popularity among City figures thanks to their courtship of business in the run-up to the election. Since then, there has been disappointment in the business community with the taxes Reeves has imposed. The Square Mile has also become disillusioned with a lack of progress on tackling issues such as cutting red tape and directing more pension savings into UK infrastructure projects.

Reeves will reiterate that the UK’s financial services are “the crown jewel in the UK economy.” She will give more details about dismantling the ring-fencing regime imposed on banks after the 2007-2009 financial crisis and unveil an AI growth strategy for the financial services sector. City figures had hoped that the Mansion House dinner would be delayed so that they could hear from the incoming chancellor.

Choices to fill that role include Energy Secretary Ed Miliband and former Health Secretary Wes Streeting. There are concerns in the City that whoever that person is may increase taxes on banks to help fund what they expect to be a more left-wing agenda from Burnham. The Trades Union Congress, the umbrella organization for unions with deep links to Labour, said Tuesday that an increase in the bank surcharge tax on their balance sheets would be “common sense and long overdue.”

The UK’s big four banks made profits of £45.7 billion ($61 billion) in 2025 while £25 billion was paid out in bonuses, according to an analysis by the TUC. Imposing a 16% surcharge would deliver £24 billion over four years, the TUC said. The surcharge is currently 3%, having been reduced from 8% by the previous Conservative government in 2023.

The current Chancellor will mount a strident defence of Starmer’s Labour government, arguing it has restored “economic stability” and proved it can deliver “radical change.” Reeves will also seek to land a message that chimes with Burnham’s push for devolved power, pointing to “growth and opportunity in every town, city and region of the UK.”