The former Bank of England deputy governor Minouche Shafik is set to join Keir Starmer’s team as chief economic adviser.
In a boost to the prime minister’s office in the run-up to the autumn budget, Lady Shafik is expected to take on the role after a year heading a Foreign Office review of the government’s foreign aid spending.
A member of the House of Lords, Shafik resigned last year as the president of Columbia University after criticism of the treatment of Jewish students during anti-Israel protests at the institution’s New York campus.
Shafik was previously head of the London School of Economics, a deputy governor of the International Monetary Fund and the top civil servant at the Foreign Office. In 2019 she was touted as a possible contender to replace Mark Carney as the Bank of England’s governor.
No 10 has sought to give more weight to its economic unit after a series of missteps that some Downing Street advisers have blamed on naivety inside the Treasury.
Most recently, Rachel Reeves was forced to back down in the face of a backbench rebellion after she proposed cutting disability benefits.
That retreat left the chancellor facing an even tougher challenge in her autumn budget, in which she is expected to have to set out plans to close a deficit of between £20bn and £40bn.
Starmer is known to want high-level economic advice of his own, separate to the support given to the chancellor.
Sajid Javid, a former chancellor, quit his post after the then prime minister, Boris Johnson, made clear that all Treasury decisions would need to be agreed by No 10.
It is understood that Reeves is unlikely to quit after the appointment of Shafik, but rumours have swirled around Westminster that the chancellor’s tenure could be cut short if she fails to steer through a politically and economically successful budget.
Reeves is also seeking to attract heavyweight advisers to the Treasury after the LSE’s John Van Reenen scaled back his support to return to academia and Anna Volero departed.
There is likely to be criticism of Shafik’s appointment from some inside No 10 who wanted an expert in the UK economy to guide Starmer’s policymaking. Shafik, who was raised in Egypt before moving to the US as a child, has spent most her working life in organisations focused on resolving global poverty.
Her supporters would argue that two and half years on the Bank of England’s interest-rate setting committee and six years at the LSE gave her a deep understanding of the UK economy.
Starmer’s office was contacted for comment.
