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Rachel Reeves has been blamed by Liz Truss for a dramatic drop in the value of the pound which has sparked fears of a new recession.
The former prime minister accused the chancellor of pushing Britain “to the brink of economic crisis”.
The scathing attack came as both Tory and LibDem MPs called on Ms Reeves to scrap a planned trip to China this weekend in which she is to seek closer economic ties to Beijing to revive Britain’s struggling growth.
The intervention by Ms Truss marks a dramatic political turn round. Labour won power on the back of persistent claims that Ms Truss “crashed the economy” during her brief spell in Downing Street.
And it came on the day that Ms Truss, who lost her Commons seat at the election, launched legal action against Sir Keir Starmer, calling on him to “cease and desist” from repeating the same claim.
Number 10 said Sir Keir had no intention of toning down his criticism of Ms Truss, and Labour sources dismissed Ms Truss’ comments, arguing she is discredited as a result of her record in office.
But the UK economic turmoil hard on the heels of Ms Reeves’ controversial Budget has highlighted the political stakes of the dispute between Labour and the Conservatives.
Shadow chancellor Mel Stride asked if the chancellor will be forced to increase taxes further or cut public services should her fiscal headroom evaporate.
He claimed Britons are having to “pay the price for yet another socialist government taxing and spending their way into trouble,” adding it is time for Ms Reeves to “change course.”
He said Ms Reeves should cancel her travel “and focus on this country instead.”
In the Commons, Reform UK deputy leader Richard Tice said Ms Reeves should “return from her ridiculous trip” given that the pound is “almost collapsing.”
Tory former Treasury minister Dame Harriett Baldwin added: “Is the reason that the [government] front bench is so empty today, the chancellor has fled to China, that she has realised that her Budget means that she now is the arsonist?”
Treasury minister Darren Jones, who was sent by the government to reply to an urgent question directed at the chancellor, said the trip is “important” for UK trade and would continue.
He went on to criticise the Tories over their record on borrowing, saying an “absolute failure to get growth into the economy” had meant they “stacked up the country’s credit card.”
He said it was normal for financial markets to vary “when there are wider movements in global financial markets … driven by data and global geopolitical events.”
Conservative peer Philip Hammond, who served as chancellor in Theresa May’s administration, backed Mr Jones’ stance on Ms Reeves’ trip.
Lord Hammond, who was also previously foreign secretary, told BBC Radio 4’s World at One: “I wouldn’t personally recommend the chancellor to cancel her trip to China. I think the trip to China is important and I think this can wait until she gets back next week, but I do think she will need to reassure parliament about what is going on when she does get back next week.”
He added: “I think it’s right that we don’t get obsessed with single-day movements in the markets because there are a lot of short-term drivers in the markets as well, but it’s clear that on a medium-term trajectory the markets are concerned about the sustainability of the fiscal position in the UK and about the robustness of UK economy.”
But outside the Commons, Liberal Democrat leader Sir Ed Davey backed Tory calls for Ms Reeves to cancel her trip.
“Instead of jetting off to China, the Chancellor should urgently come before the House of Commons to cancel her counterproductive jobs tax and set out a real plan for growth,” he said.
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