You must be joking! Rachel Reeves laughs off Tory fury at market meltdown in Commons clashes… as she hints at emergency spending cuts to deal with spiking debt costs and stalling economy_Nhy
Rachel Reeves laughed off Tory condemnation of the markets meltdown today – as she hinted at emergency spending cuts.
The Chancellor was berated for leaving Britain in a ‘mess’ as she faced the Commons after returning from her controversial trip to China.
Politicians queued up to demand answers on the extraordinary hammering the UK has been taking from traders – with the Pound sliding against the US dollar and interest on government borrowing spiking.
But Ms Reeves could be seen joking with Angela Rayner and other ministers on the front bench as she was told her huge Budget tax raid is to blame. Businesses have warned it is crushing growth by fueling inflation and triggering a jobs cull.
Economists say the government will almost certainly have to slash spending or push taxes even higher this year as a result.
That could come to a head in March when the OBR watchdog updates its forecasts and gives a view on whether the government is still on track to meet fiscal rules.
Ms Reeves gave a strong indication that she will choose spending cuts as she stressed there will be ‘just one Budget per year’. A Budget Finance Bill is required to implement most tax changes immediately.
‘We have committed to have just one budget per year to provide businesses with the certainty that they need to invest, so we will have an update from the OBR in March,’ she said.
‘We have set out the fiscal rules that we will balance day to day spending with tax receipts and we will get debt down as a share of GDP within the forecast period, and we will continue at all times to meet those fiscal rules.’
Chancellor Rachel Reeves will make a statement in the Commons following her controversial trip to China over the weekend
Shadow chancellor Mel Stride said in the House: ‘The Chancellor has been away so let me update her on the mess she left behind: 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, the crippled businesses with colossal tax rises, breaking all their promises. This is a crisis made in Downing Street.’
He added: ‘While the Government was losing control of the economy, where was the Chancellor?’
Ms Reeves told MPs: ‘We have seen global economic uncertainty play out in the last week.
‘But 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.’
Ministers were offered some relief this morning as better news from the Middle East helped calm markets, with gilts stabilising and the Pound clawing back a little ground on the dollar.
Although debt costs have been rising around the world, Britain has been harder hit than many other countries.
Before the Chancellor’s lunchtime statement, Sir Keir gathered his Cabinet to take stock of the situation.
In a sign of the damage being done to Labour, a YouGov poll last night found the party was only one point ahead of Reform. Nigel Farage‘s outfit has leapfrogged the Tories into second place.
Sir Keir tried to shore up Ms Reeves yesterday saying she was doing a ‘fantastic job’ running the economy.
But that only sparked a fresh bout of speculation, as he dodged on whether she would stay in her job for the rest of the Parliament.
Downing Street scrambled to quash that furore later by confirming she will be in post until 2029 – a commitment previously given to Foreign Secretary David Lammy.
No 10 was also forced to voice ‘full confidence’ in City minister Tulip Siddiq, who is facing growing pressure over corruption allegations which she disputes, but which are now being examined by the PM’s sleaze investigator.
Ms Reeves’ Tory shadow Mel Stride tore into her in the House, dryly noting ‘it is good to see her in her place’ after she rejected calls to scrap the trip and stay to calm the markets
Ms Reeves’ trip to Beijing secured investment worth just £600million, branded a ‘puny’ amount by critics
Sir Keir tried to shore up Ms Reeves yesterday saying she was doing a ‘fantastic job’ running the economy
A critical moment will come when the Office for Budget Responsibility publishes an update on the economy on March 26.
That will decide whether the government faces breaking its own fiscal rules – which Sir Keir insisted it will ‘absolutely stick’ to.
The PM refused to rule out a package of emergency spending cuts in March to balance the books. No10 confirmed that the Treasury was also considering the case for further welfare reforms to save money.
‘We’re going to stick to the fiscal rules,’ he said.
‘That is a very important thing that we’ve said throughout.’
Sir Keir added: ‘I’m confident in our mission for growth and I’m confident, completely confident in my team. Rachel Reeves is doing a fantastic job. She has my full confidence. She has the full confidence of the entire party.’
However, some Labour MPs believe Ms Reeves will not survive unless she can turn round the economy this year.
One urged Sir Keir to remove her, saying: ‘I personally have never been a strong supporter of Rachel Reeves.
‘I don’t think she’s competent and I think the only way to start to restore confidence is with a new Chancellor.’
It comes amid further signs that confidence in the Government’s handling of the economy is crumbling, with all three of Britain’s biggest business groups speaking out yesterday.
Rupert Soames, chairman of the Confederation of British Industry, told the BBC that by asking business to fill in a £22 billion hole in public finances, Labour had ‘created another… a hole in the confidence and trust that business has in the Government’.
Jane Gratton, of the British Chambers of Commerce, said: ‘Business confidence has been hit hard since the Budget.’
And the Institute of Directors said Ms Reeves’s Budget had resulted in a ‘precipitous decline in business confidence’, adding that ‘the snuffing out of growth in the latter part of 2024 will leave the Chancellor with little fiscal room if any’.
Tory leader Kemi Badenoch said: ‘Rachel Reeves has driven Britain’s economy into the ground…
‘Labour promised stability and instead the City minister is mired in corruption investigations and the Chancellor is hanging on by her fingernails.’
Former Tory finance minister Gareth Davies said Labour had ‘two lame ducks’ in the Treasury.
‘Labour’s inaction and indecision is worsening this market turmoil of their making. They must urgently get a grip on their plans,’ he added.
