RACHEL Reeves has opened the door to emergency spending cuts as market chaos puts pressure on public finances.
The embattled chancellor hit the ground running yesterday as she defended her controversial trip to China as Britain’s economy took a hit.
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Warlord Rachel Reeves opened the door to emergency spending cuts amid market chaosCredit: AFP
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Rachel Reeves was snapped laughing with other Labor leaders yesterday
She blamed “global markets” for a record jump in UK debt interest payments, rejecting Tory claims that her budget caused the rise.
Ms Reeves also refused to rule out the full budget in March.
But with interest payments rising, Ms Reeves hinted public services could face imminent cuts as she vowed to stick to her tough financial rules “at all times”.
These rules require the Government to cover daily spending through taxes and debt reduction.
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However, rising borrowing costs have left little room for maneuver, and forecasts suggest it could breach them.
Facing MPs in the Commons, Ms Reeves said she would address concerns about the state of the public purse in March after the next update from the Office for Budget Responsibility.
Asked in parliament whether she could rule out tax increases and spending cuts in the emergency budget, the chancellor instead recommitted to the borrowing rules announced in October.
She said: “We have committed to just one budget a year to give businesses the certainty they need to invest, so we will have an update from the OBR in March.
“We have set fiscal rules to balance day-to-day spending with tax receipts and reduce debt as a share of GDP within the forecast period, and we will continue to meet those fiscal rules at all times.”
Ms Reeves also promised to go “further and faster” despite the market turmoil as she sought to reassure MPs after a week of heavy borrowing costs.
Downing Street also did not rule out an emergency budget, with the Prime Minister’s spokesman saying: “No one should doubt the Chancellor’s commitment to economic stability and sound public finances.”
The Chancellor’s comments came as she came under fire for her trip to China, defending it as vital to boosting UK investment.
A squirming Keir Starmer is refusing to say Rachel Reeves will be chancellor at the next election after the horror budget
But shadow chancellor Mel Stride accused her of “banging around the world with a begging bowl” as markets slumped at home.
Comparing her position to Shakespeare’s tragedy, he wittily said: “To go or not to go? That’s the question now.”
An unfazed Chancellor was seen laughing with Labor leaders as Mr. Stride interfered in her management of the economy.
The Tories hit out at X: “Labour thinks losing control of the public finances and sending the economy into crisis is ridiculous… Disgraceful.”
The row in the Commons comes after Sir Keir Starmer added fuel to the fire by dodging questions about whether Ms Reeves would remain in No 11 for the long term, before Downing Street insisted she would remain in the position until the end of Parliament.
The yield on 30-year government bonds has jumped to levels not seen since the 2008 crash, prompting fears Labor could be forced to either raise taxes or cut public spending to balance the books.
On Tuesday, former shadow chancellor John McDonnell warned that cuts to balance the books would be “politically suicidal”.
He told BBC Radio 4’s Today programme: “The electorate has to be protected, otherwise I’m afraid we’re faced with a level of disillusionment which then turns people towards Reform, unfortunately, and I think that would be a disaster for the country.”
The former Labor leader, who has been suspended, suggested the Government just had to “see through” the market turmoil, but insisted there was a need for a wider review of economic strategy including intervention by the Bank of England “if necessary”.
Ministers were offered relief on Tuesday morning as the pound regained its footing after hitting fresh 14-month lows on Monday, while British government bonds clawed back some of what had been lost after a recent big sell-off.
Sterling held firm at US$1.22 in morning trade, after falling to its lowest level since November 2023 in recent days.
Government borrowing costs showed signs of stabilizing, with yields on 10-year UK bonds – also known as gilts – falling three basis points to 4.86 percent.
The yield on 30-year gilts hit a 27-year high on Monday, and 10-year yields rose to new highs not seen since 2008.
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