Rachel Reeves was seen with a tear rolling down her cheek in the Commons as the Prime Minister refused to guarantee she would remain in her job until the next election.
The Chancellor appeared visibly upset while sitting next to Sir Keir Starmer as he faced a grilling over the chaos of Tuesday night’s benefits cuts vote.
Following Prime Minister’s Questions, Downing Street insisted that Ms Reeves “is going nowhere” and has Sir Keir’s "full backing".
See also: A year that ends in tears - Rachel Reeves's time in number 11
A spokesperson for Ms Reeves said the Chancellor was unsettled by a “personal matter”. Sources suggested she had briefly been rebuked by Speaker Sir Lindsay Hoyle before PMQs for giving long answers during Treasury questions on Tuesday.
It was also reported that the Chancellor had had an argument with the PM shortly before arriving in the chamber. No10 and No11 both denied the claims.
Markets were rocked by speculation over the Chancellor’s future. The pound slid by 1.14% to 1.358 against the US dollar on Wednesday. Sterling also fell by 0.8% to 1.155 against the euro, striking its lowest level since April.
Sir Keir appeared in front of MPs on Wednesday after being forced to scrap key parts of his welfare reforms, which has left an almost £5 billion black hole in Ms Reeves' spending plans.
It has fuelled speculation that the government will be forced to hike taxes later this year. Tory leader Kemi Badenoch said Ms Reeves looked "absolutely miserable" and challenged the Prime Minister to say whether the Chancellor would keep her job until the next election.
But Sir Keir dodged the question and replied that Mrs Badenoch "certainly won't".
The Tory leader said: "How awful for the Chancellor that he couldn't confirm that she would stay in place."
Labour minister Ellie Reeves appeared to be holding her sister's hand as she left the Common’s Chamber.
Asked about Ms Reeves' tears, a spokesperson for the Chancellor said: "It's a personal matter, which, as you would expect, we are not going to get into.
"The Chancellor will be working out of Downing Street this afternoon."
Asked why Sir Keir did not confirm in the Commons that he still had faith Ms Reeves, the Prime Minister's press secretary said: "He has done so repeatedly.
"The Chancellor is going nowhere. She has the Prime Minister's full backing.
"He has said it plenty of times, he doesn't need to repeat it every time the Leader of the Opposition speculates about Labour politicians.
"The Chancellor and the Prime Minister are focused entirely on delivering for working people.”
Sir Keir was forced to gut his welfare bill at the last minute after a rebellion by backbench Labour MPs. He removed plans to restrict eligibility for personal independence payments (Pip) in order to head off the Government’s first Commons defeat on Tuesday evening.
Changes to Pip will now be delayed until after a review of the benefit, not due to conclude until autumn 2026.
The Institute for Fiscal Studies warned that the concessions meant that Ms Reeves could now expect no “net savings” by 2029/30 - a key year for meeting her fiscal targets.
Ms Badenoch said Tuesday’s "humiliating U-turn" showed the PM cannot control his MPs and is "too weak to get anything done".
Sir Keir defended his welfare reforms saying they will be "better for individuals, better for the taxpayer and better for the economy".
Speaking at Prime Minister's Questions, Conservative leader Kemi Badenoch said: "It's been a difficult week for the Prime Minister.
“So, let's start with something simple. Can the Prime Minister tell the House how much his welfare Bill is going to save?"
The Prime Minister replied: "What we delivered last night was a Bill which ends mandatory reassessment of those with severe disabilities, that is the right thing to do. It re-balances Universal Credit, that is long overdue. And it sets out a pathway to reform of Pip (personal independence payment).
"It's consistent with the principles I set out throughout. If you can work, you should work. If you need help into work, the state should provide the help. The system that they broke doesn't do so."
He added: "If you can't work, you must be supported and protected. The reformed welfare system that we're putting place will be better for individuals, better for the taxpayer, and better for the economy."
