EXCLUSIVE: Bob Lyddon has said the UK is “in uncharted territory” after Rachel Reeves started crying during Prime Minister’s Question Time on Wednesday.
Sir Keir Starmer has been branded a “puppet of the Left” after Chancellor Rachel Reeves broke down in tears in the Commons following a dramatic U-turn on disability benefit reform. Financial expert and Brexiteer Bob Lyddon said the Chancellor’s visible distress — which Treasury sources claimed stemmed from a personal matter — was politically devastating and left the Government “in uncharted territory”.
Mr Lyddon, founder of Lyddon Consulting Services, said: “Starmer has pulled the rug from under Rachel Reeves‘ Spending Review, the ink on which is barely dry. All that is left is the further increase in spending. That spending just became unfunded. The Government’s day-to-day costs are out-of-control, and there is no chance of their coming into compliance with Labour‘s fiscal rule: that they should be covered by revenues by the end of this Parliament.”
Rachel Reeves was in tears while Sir Keir Starmer was at the dispatch box yesterday (Image: Pixel8000)
“Starmer has shown that he will concede on any area of cost reduction if quite a few Labour MPs object to it. Reeves is no longer the actual Chancellor, and on that basis alone she should resign.
“Bursting into tears during Prime Minister’s Questions makes her position untenable. We just cannot be doing with that. Her breakdown leaves us in uncharted territory.”
Ms Reeves wept openly on the green benches after Sir Keir confirmed he would abandon plans to tighten eligibility for Personal Independence Payments (PIP) — a policy Labour had previously adopted from the outgoing Conservative Government.
The reform was expected to save more than £5 billion by replacing regular payments with vouchers or one-off grants for certain claimants.
Bob Lyddon pointed out that when Kwasi Kwarteng resigned in 2022, Liz Truss’s days were numbered (Image: Getty)
Labour had presented the plan as part of a broader push to control public spending and reduce welfare dependency.
But amid pressure from Labour backbenchers and campaign groups, Sir Keir dropped the proposal during a tense meeting of the Parliamentary Labour Party. The move triggered an immediate backlash and left Ms Reeves visibly shaken in the Chamber.
Mr Lyddon added: “The reversal of the welfare cuts has knocked £5 billion off the Chancellor’s supposed £10 billion of ‘fiscal headroom’ over the life of the Parliament.
“Big deal! This ‘fiscal headroom’ is a nonsense created by irresponsible elected and unelected officials, and endorsed by sycophantic ‘think tanks’. Its existence serves to create an unwarranted light at the end of the tunnel.”
Bob Lyddon also made reference to former Labour leader Jeremy Corbyn, now an independent MP (Image: Getty)
“In doing so it obscures the size and nature of the tunnel itself: the country has borrowings of the entire size of its economy, the costs and borrowings are growing quicker than the economy itself, and government revenues are around 5% lower than its costs. The ‘fiscal headroom’ is conjured up through a 5-year spreadsheet that bakes in robust performance in years 4 and 5, notwithstanding performance now that is plummeting down the tunnel towards the earth’s core.
“If Reeves goes, why should Starmer stay? When Kwarteng went, Truss had to go as well. The answer is that the Left of the Labour Party won’t want him to go, now that they have him in their pocket. Jeremy Corbyn will be cursing: his new party, if he now bothers to launch it, will not get a dozen or so left-wing Labour MPs defecting to it. They don’t need to, now they are running the country through a puppet PM.”
Sir Keir insisted the Government remained committed to “supporting those most in need” while encouraging more people back into work. But critics said the decision to cave under internal pressure had exposed the limits of his authority.
Labour secured a large majority in 2024 but won just 35% of the national vote — a result some in the party described as “soft”. Since then, support has slipped in key seats, with Reform UK and the Greens gaining ground.
One Labour MP described the U-turn as “the worst day of Starmer’s premiership so far,” while another warned that any further attempts at reform would now be met with fierce resistance from within.
Treasury officials insisted other routes to savings would be explored, but gave no details. In the absence of new tax rises or large-scale borrowing, fiscal options appear limited.
Meanwhile, allies of Ms Reeves fear the episode has permanently damaged her authority and given internal critics a green light to challenge her policies.
Sir Keir told a Cabinet meeting that the revised approach was consistent with Labour’s values and fiscal rules. However, Mr Lyddon warned that markets would begin to doubt whether the Government had any real grip on spending.
He said: “Labour promised economic stability. What they’ve delivered is a public breakdown, a shredded policy, and a Prime Minister who can’t face down his own party. The consequences will be felt far beyond Westminster.”
