Rachel Reeves is facing accusations of a “cover-up” over her breach of housing rules while renting out her family home in south London as the row took a dramatic twist.
The Chancellor told Prime Minister Sir Keir Starmer on Wednesday that she did not obtain the required “selective” rental licence for her £3,200-a-month Dulwich home when she moved into No 11 Downing Street following the election.
She initially said that she was unaware of the requirement, but emails between her husband and the letting agency used to rent out the property published on Thursday showed he had been informed about the need for a licence.
The estate agents, Harvey & Wheeler, have taken the blame for the “oversight” in not applying for a licence on her behalf, despite having agreed to do so.
The Prime Minister said in a letter to Ms Reeves, published on Thursday night, that after reviewing the correspondence, "I still regard this as a case of an inadvertent failure to secure the appropriate licence, which you have apologised for and are now rectifying".
He added: "Having consulted the Independent Adviser on Ministerial Standards and received his clear and swift advice, with which I concur, I see no need for any further action."
Sir Keir said it was "regrettable" that she had not shared the information in her first letter to him about the matter on Wednesday, but said he accepted she was "acting in good faith".
"It would clearly have been better if you and your husband had conducted a full trawl through all email correspondence with the estate agency before writing to me yesterday," the Labour leader said.
The Prime Minister's independent standards adviser, Sir Laurie Magnus, told him that after seeing the emails, he still believed Ms Reeves made an "unfortunate but inadvertent error".
In a letter to Sir Keir, he said he found "no evidence of bad faith" in Ms Reeves's contradicting statements about her awareness of the need for the licence.
Sir Laurie wrote: "It is important to address the Chancellor's statement in her letter to you of 29th October that she and her husband were not aware of the need for a licence. This was a key consideration reflected in my advice to you yesterday."
However, emails identified since then, and made public today, demonstrate that the Chancellor's husband was in fact made aware of the need for a licence during the summer of 2024 and that he instructed the estate agency to obtain the licence accordingly.
"It is clear from his explanation today that the Chancellor's husband did not recall this exchange, which took place at a very busy time."
He added: "It is regrettable that information provided on successive days has generated confusion, but I find no evidence of bad faith."
In an attempt to defuse the situation, Ms Reeves published emails on Thursday between her husband and the agency showing that Harvey & Wheeler had agreed to apply for the licence, while telling the Prime Minister she took "full responsibility" for the matter.
But the Tories said the correspondence indicated Ms Reeves had been informed about a need for a licence, contradicting her earlier claim that she was unaware of the requirement.
The emails were passed to the Government’s ethics adviser Laurie Magnus, Downing Street confirmed on Thursday afternoon.
The chancellor’s lettings agency apologised to the Chancellor for an "oversight" that led to the failure to obtain a licence they said occurred when the property manager responsible for applying for the licence on her behalf had "suddenly resigned" before the tenancy began.
Gareth Martin, owner of Harvey Wheeler, said: "We alert all our clients to the need for a licence. In an effort to be helpful our previous property manager offered to apply for a licence on these clients' behalf, as shown in the correspondence. That property manager suddenly resigned on the Friday before the tenancy began on the following Monday.
"Unfortunately, the lack of application was not picked up by us as we do not normally apply for licences on behalf of our clients; the onus is on them to apply. We have apologised to the owners for this oversight.
"At the time the tenancy began, all the relevant certificates were in place and if the licence had been applied for, we have no doubt it would have been granted.
"Our clients would have been under the impression that a licence had been applied for. Although it is not our responsibility to apply, we did offer to help with this.
"We deeply regret the issue caused to our clients as they would have been under the impression that a licence had been applied for."
💬 Comment: Rachel Reeves' error matters. It shows there's one rule for us, another for them
The Conservatives questioned the Chancellor's initial explanation that she had not been made aware that she was required to get a rental licence.
Kemi Badenoch, the Tory leader, said: “This whole thing stinks. The Prime Minister needs to stop trying to cover this up, order a full investigation and, if Reeves has broken the law, grow a backbone and sack her.”
A Tory party spokesperson said: “Last night Rachel Reeves said 'she had not been made aware of the licensing requirement'. Today, we find out that Reeves was alerted to the need for a licence in writing by the estate agents.
“Having been caught out, the Chancellor is now trying to make the estate agents take the blame, but Reeves never followed up with them to ensure that the licence had been applied for, or checked if the licence had been granted.
"Regardless, under the law, Reeves and her husband are responsible for ensuring the licence is granted. With more information coming to light every few hours, the Prime Minister needs to grow a backbone and start a proper investigation."
Sir Keir has continued to give his backing to Ms Reeves and No 10 insisted she would be delivering the Budget next month.
In a letter to the PM, Ms Reeves “sincerely” apologised for her “inadvertent error” of not obtaining the licence, which was revealed by the Daily Mail.
An exchange of letters between Sir Keir and Ms Reeves revealed they had met to discuss the matter on Wednesday evening, after it came to light.
The Chancellor told the Prime Minister that “regrettably” she and her family were not aware a licence was needed in their area of the Southwark borough.
Southwark Council requires people renting out their properties in certain areas to get one of the licences in advance.
The council's website states: "You can be prosecuted or fined if you're a landlord or managing agent for a property that needs a licence and do not get one."
The Prime Minister’s spokesman on Thursday repeatedly declined to say whether Ms Reeves had broken the ministerial code by failing to register for a licence or whether she would resign if she received a fine from Southwark council.
"The ministerial code makes clear that in certain circumstances and in consultation with the independent adviser, an apology is sufficient resolution," he said.
Policing Minister Sarah Jones on Thursday morning insisted Ms Reeves should not stand down.
"No, she shouldn't," she told Times Radio.
"She after the election, of course, moved into 11 Downing Street, as chancellors do. She has a family home in Southwark that she rented out through a letting agency.
“Now, Southwark Council has what's called a selective licensing scheme.
"Some boroughs have them, some don't ... The Chancellor wasn't aware that she had to apply for this selective licence. As soon as she became aware, she rectified the situation.”
Reeves' family home in London was put up for rent after Labour won the election in July 2024 for £3,200 a month.
Initial reporting said the Chancellor was understood to have relied upon the advice of a letting agent, which said it would advise if a licence was needed.
Ms Reeves told Sir Keir: “This was an inadvertent mistake. As soon as it was brought to my attention, we took immediate action and have applied for the licence.”
She added: “I sincerely apologise for this error and I would be happy to answer any questions you may have.”
In his reply, the Prime Minister said he had consulted his independent adviser Sir Laurie, adding: “He has advised me that in relation to your inadvertent failure to secure the appropriate licence for your rental property – and in light of your prompt action to rectify the position, including your apology – further investigation is not necessary.
“The Ministerial Code makes clear that in certain circumstances, an apology is a sufficient resolution. It is important that all ministers are able to acknowledge where they consider themselves to have fallen below the standards expected of them.
“I am satisfied that this matter can be drawn to a close following your apology.”
The Prime Minister said it was “regrettable that the appropriate licence was not sought sooner” but said he believed the Chancellor was “treating this matter with the urgency and seriousness it deserves”.
Sir Keir’s decision to back Ms Reeves comes less than a month until the Budget, in which she is expected to have to make difficult fiscal decisions.
It also follows on the heels of several high-profile exits from Government as a result of scandals.
Among these was Angela Rayner, the former deputy prime minister and housing secretary, who resigned following a row about her tax affairs.
Lord Mandelson was also sacked as ambassador to Washington after details of his relationship with the dead paedophile financier Jeffrey Epstein came to light.
Conservative leader Kemi Badenoch had earlier called on the Prime Minister to “launch a full investigation” into Ms Reeves’ error.
She added: “He once said ‘lawmakers can’t be lawbreakers’.
“If, as it appears, the Chancellor has broken the law, then he will have to show he has the backbone to act.”
A Conservative spokesperson added: "Rachel Reeves has broken the law and broken the ministerial code, but Keir Starmer is too weak to sack her.
"Keir Starmer pledged to restore integrity to politics, but now he's laughing in the face of the British public. He should grow a backbone and sack the chancellor now."
Daisy Cooper, Lib Dem deputy leader, said: “The Chancellor is meant to be delivering growth but the only thing she appears to be growing is the Government’s list of scandals.
“Just weeks before the Budget, this risks seriously undermining confidence in this Government and its ability to focus on the urgent tasks at hand.”
