Less than a month before she is due to deliver the budget, Rachel Reeves has admitted breaking rules by failing to apply for a licence from her local council before letting out her south London home.
Keir Starmer accepted an apology from Reeves, who said she had not known a licence was required, and declared the matter closed.
However, there was a further development on Thursday when Reeves found emails showing that the letting agent for the property had told her husband that a licence would be necessary. The property manager offered to submit the application for them and then failed to do so – having resigned before the tenancy started.
Reeves told the prime minister she took “full responsibility” for the failure to obtain a licence and that she was sorry for not finding the information sooner.
Despite the estate agent having admitted an “oversight”, the Conservatives are still calling for a further investigation, criticising Reeves for not having followed up with the estate agent.
What are the consequences now for the chancellor of failing to obtain a licence and does the admission by the estate agent exonerate her?
What has Rachel Reeves done wrong?
After Labour won the election last year and Reeves became chancellor, she and her family moved into 11 Downing Street. In September 2024 she let out her family home in Dulwich, south-east London, for a reported £3,200 a month. The Daily Mail revealed on Wednesday night that Reeves needed a licence to do so – and had failed to obtain one.
Why did she need a licence?
Local authorities in England have the power to require landlords to obtain a licence before renting homes in their areas. The rules, introduced by the 2004 Housing Act, are intended to help councils tackle problems in their areas such as poor housing conditions, low demand, deprivation, antisocial behaviour and crime.
Under changes made by the Labour government in December last year, councils no longer need to apply for permission from central government to introduce these licensing schemes. But not all councils in London require licences.
Southwark council, where Reeves’s home is located, operates a selective licensing scheme of this kind. This was first introduced in 2021 and extended to cover the area where Reeves’s house is located in 2023.
It requires any landlord letting out a property to obtain a licence costing £945 by submitting documents proving the house is fit for purpose, including gas, electrical and fire safety certificates.
What are the consequences of not buying a licence?
Southwark 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.” It operates a “rogue landlord” register of people who have been fined for breaking the rules.
Failing to obtain a licence is a criminal offence punishable with an unlimited fine on prosecution, a fine of £30,000 as an alternative to prosecution, or an order to pay back up to 12 months in rent.
However, in a statement, the council said its enforcement action was reserved for those who ignore a warning letter giving people 21 days to comply, or whose property does not meet the required standards. Given that Reeves has now applied for a licence, it would seem likely she will not face any action from the local authority.
What has the chancellor said?
Reeves’s spokesperson said she had made an “inadvertent mistake”. She let out her home through a letting agent and was not aware of the problem before Wednesday. “As soon as it was brought to her attention she took immediate action and has applied for the licence,” they said.
The chancellor referred herself to the independent adviser on ministerial standards and the standards commissioner. She has written to Keir Starmer to apologise, and handed over emails from her husband relating to the matter to the adviser on ministerial standards. In her latest letter, she said she took “full responsibility” for failing to obtain the licence and not finding the emails sooner.
What has the prime minister said?
Starmer met Reeves on Wednesday evening after the matter came to his attention. In a letter to her afterwards, he said he had consulted the adviser on ministerial standards who advised him that “in light of your prompt action to rectify the position, including your apology – further investigation is not necessary”.
He added that Reeves was “treating this matter with the urgency and seriousness it deserves” and that he was satisfied it could be drawn to a close after her apology. He pointed out that the ministerial code states that in certain circumstances an apology is enough. On Thursday, his official spokesperson said he had full confidence in Reeves.
What has the estate agent said and does it exonerate Reeves?
The estate agent has said it was an “oversight” that they did not apply for the licence on behalf of Reeves. It appears that Reeves and her husband did not follow up with the agent about the licence or notice that they had not been billed £945.
However, the emails appear to show it was indeed an inadvertent error, and one that Reeves is now addressing.
What is the opposition saying?
At first, the Conservative leader, Kemi Badenoch, said the error made the chancellor’s position “extremely tenuous” and called for the prime minister to launch a full investigation. She accused the chancellor of having “spent months floating punishing tax hikes on family homes” while at the same time “profiting from illegally renting out her house”. Priti Patel, the shadow foreign secretary, went further and said Reeves should be sacked.
After the emails emerged, a Conservative party spokesperson said: “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.”
How bad is this for Reeves?
The error is embarrassing and puts the chancellor’s financial arrangements under scrutiny but it is clear it was a mistake. The main outstanding question is why she did not follow up with the estate agent about why the licence had not been obtained.
The timing of the disclosure, which has come less than a month before the budget, has been a distraction for the chancellor. And if any other breaches emerge, in relation to this property or anything else, it could quickly spiral into a full-blown crisis for Reeves. She has previously faced scrutiny over her CV and expenses while she was working at a bank before entering politics.
However, No 10 has moved to quickly shut down the row. Starmer swiftly backed Reeves, saying he had been advised by his standards adviser that a full investigation was not necessary. If it holds, it boosts the likelihood that Reeves will weather the controversy.
What does this mean for the government?
Immediate comparisons have been made to Angela Rayner, who was forced to resign in September for not paying enough stamp duty when buying a flat in Hove. Rayner’s breach was more serious, and she was found by the standards adviser to have broken the ministerial code. Significantly, she failed to seek the expert tax advice that had been recommended to her.
Be that as it may, the latest controversy contributes to a sense of one scandal after another for Starmer’s government, and ultimately damages the prime minister who put ethics and integrity at the heart of his offer to voters.
