Reeves rejects claims economic turbulence is a ‘crisis made in Downing Street’

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Rachel Reeves has launched a defence of her economic plan, rejecting claims that turbulence in the financial markets is a “crisis made in Downing Street” and urging her critics to “get real”.

But facing a grilling from MPs in the Commons after the cost of government borrowing increased and the value of the pound fell in recent days, putting her plans for the nation’s finances at risk, the chancellor admitted it underlines the need to go “further and faster” in search of economic growth.

While she doubled down on a commitment to stick to the government’s fiscal rules, she refused to rule out future spending cuts, saying she won’t write “five years of budgets in the first six months of a Labour government.”

The rules require day-to-day spending to be met from revenues rather than further borrowing. But rising borrowing costs eat into the funding available, which could force Ms Reeves to act to either reduce spending or raise taxes to comply with her rules when the budget watchdog gives its updated forecast in March.

Ms Reeves also insisted that the rise in bond yields seen in the UK markets is an international problem, saying: “I do not believe that it is reasonable to suggest that the reason why bond yields in the United States, in Germany and France have risen is because of decisions now by this of government.”

Hitting back at Tory MP Luke Evans, who had asked what Ms Reeves was doing to do show the financial markets “she really does understand how to deliver growth in the UK”, she urged him to “get real”.

It comes as Sir Keir Starmer is facing growing calls to sack his chancellor amid growing turbulence in the economy, with Ms Reeves’ Tory opposite number Mel Stride comparing her position to a Shakespearean tragedy, adding: “To go or not to go? That is now the question.”

The shadow chancellor accused the government of making promises to voters while “pouring the poison into their ear”.

On Monday, Downing Street was forced to insist that Ms Reeves will be the chancellor “for the whole of this parliament”, just hours after the prime minister had appeared reluctant to back her, avoiding the yes or no question of whether she would still be in place at the next election.

Addressing the Commons on Tuesday, Ms Reeves also faced questions over her decision to travel to China over the weekend, with Mr Stride asking: “When the government was losing control of the economy, where was the chancellor?”

“The pound has hit a 14-month low, government borrowing costs are at a 27-year high, growth has been killed stone dead, inflation is rising impacting millions, interest rates are staying higher for longer, and business confidence has fallen through the floor.

“The party opposite talked down the economy, they crippled businesses with colossal taxes breaking all their promises. This is a crisis made in Downing Street”, the shadow chancellor said.

But defending her position, Ms Reeves said “leadership is not about ducking these challenges, it is about rising to them”.

“The economic headwinds that we face are a reminder that we should – indeed, we must – go further and faster in our plan to kickstart economic growth.

“By bringing stability to the public finances after years of instability under the party opposite, unlocking investment that plummeted under the previous government and pushing ahead with the essential reforms to our economy and public services.

“That is my message to the House today because if we get it right, the prize on offer to us, to the British people is immense – the opportunity to make working people better off by making Britain better off. That is the mandate that this government has and this is what we will deliver”, she said.

Defending her decision to visit Beijing, Ms Reeves said “not engaging with China is simply not an option”, adding that “security and economic growth go hand in hand”.

The chancellor also said she was able to raise human rights and the case of detained British national and pro-democracy activist Jimmy Lai on her visit to China.

It came after Liberal Democrat Treasury spokeswoman Daisy Cooper said the chancellor “should not have gone to China unless there was a commitment that Jimmy Lai was going to be released”.

Hitting back, Ms Reeves said: “I’m not sure how the honourable lady thinks we’re going to raise difficult issues unless we engage with the second-biggest economy in the world.

“And because I went to China, I was able to raise issues around human rights, around forced labour, around Hong Kong and Jimmy Lai, and around the sanctioning of parliamentarians. You can’t raise those issues unless you are in the room.”