Rachel Reeves says UK must go 'further and faster' in search of growth - as Chancellor faces criticism over China visit
14 January 2025, 14:21 | Updated: 14 January 2025, 15:48
Rachel Reeves told the Commons on Tuesday that the UK must go "further and faster" in terms of economic growth, amid mounting criticism over her recent trip to China.
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Shadow chancellor Mel Stride accused the Chancellor of ducking difficult question and refusing to "face up to her own failures" during the Commons clash.
Noting Reeves "ducked the difficult questions" by jetting off to Beijing, the Chancellor responded: "Why did I go to China? Well, I went to secure tangible benefits for British businesses trading overseas."
Doubt was cast over the Chancellor’s future on Tuesday, with Sir Keir Starmer appearing to hedge his support for her.
Pointedly refusing to guarantee she would remain in her post until the next general election, the PM's comments come hours before Downing Street sought to quell speculation surrounding her future.
Starmer backs Reeves until 2029: LBC analysis
Number 10 reiterated that Ms Reeves would remain Chancellor for “the whole of this Parliament.”
During the Commons debate, Ms Reeves defended her trip to China, accusing the Conservatives of presiding over 14 years of "stagnant economic growth, higher debt and economic uncertainty".
She added: "And we have seen global economic uncertainty play out in the last week.
It's a session that saw Dave Doogan, the SNP MP told the Chancellor it was "beyond parody" that Ms Reeves visited China and returned with £600m over five years.
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He added the figure amounted to less than 1/90th of HSBC's annual profit.
The Chancellor returned from a trip to China to find fresh questions over the Government’s ability to adhere to its own fiscal rules, amid rising borrowing costs and fears of economic stagnation.
She added she and the Bank of England are set to "work closely together" to ensure the economy remains "competitive" in global markets.
Reeves says she "won't write five years' worth of budgets in the first six months of a Labour government" but reiterated her commitment to meeting the fiscal rules she set out in the last budget.
"We know what happens when governments lose control of public finances, they crash the economy and end up on that side of the House," she added.
“Either he ties his hands and keeps her into 2029, or he opens speculation as to her position. Unfortunately, Starmer seems to have bungled it and done both at the same time,” Simon Finkelstein, a former special adviser to Jeremy Hunt and Dominic Raab told LBC's Nick Ferrari at Breakfast on Tuesday.
"It's worth reflecting how remarkable, since July, the election in which Rachel Reeves admittedly was very, very critical to, and the economic strategy that got them elected, they were already speculating over her future. So it's a really remarkable state of affairs," he told LBC.
The pound fell to a fresh 14-month low on Monday, at 1.21 dollars. It regained some ground later in trading but still finished 0.3% lower at 1.216 when London's markets closed.
UK government bonds - also known as gilts - saw 10-year yields rise to fresh highs not seen since 2008. They were five basis points higher at 4.89% at the end of trading.
Longer-term borrowing costs were also higher, with the yield on 30-year gilts up three basis points at 5.45%, after striking its highest level for 27 years earlier on Monday.
Rising yields, which move inversely to bond prices, signal investors’ declining willingness to hold UK debt – a warning sign that the Government is grappling with a credibility crisis.
Sir Keir Starmer has moved to shore up the No 10 policy unit, enlisting Olaf Henricson-Bell, a former Treasury communications chief under three Conservative chancellors, to lend his expertise. But insiders suggest more concrete action may be required to bolster market confidence.
Speaking to LBC's Nick Ferrari at Breakfast, Mr Finkelstein suggested that Ms Reeves is likely to survive, for now:
“If I was a betting man, I’d say Rachel Reeves lasts the distance. Otherwise, Keir Starmer has a Liz Truss problem. As soon as you get rid of your Chancellor, the focus immediately shifts onto you. This wasn’t simply a budget made in the Treasury – it was signed off by Downing Street.
“That said, we’re likely to see serious spending cuts in March’s Budget if the Chancellor is to meet her fiscal rules."
The Prime Minister has vowed to take a “ruthless” approach to public spending, with Downing Street insisting “nothing is off the table” as departments explore budget cuts.
Meanwhile, political challenges are mounting. A YouGov poll for Sky News over the weekend revealed that Labour’s lead has narrowed to a single percentage point, with the party polling at 26 per cent, Reform UK at 25 per cent, and the Conservatives trailing at 22 per cent.
Mr Finkelstein criticised Labour’s performance since taking office, describing it as a “very poor start.”
"And I think really the critical problem has been trust. We had a Labour Party that before the election said they would not raise taxes, specifically national insurance, they would reform public services, not pour ever greater sums in.
"And they had ironclad fiscal rules. And unfortunately, since then, what we've seen is tax has gone up, specifically national Insurance, fiscal rules have been changed and lots, lots of more borrowing to fund public services."
With March’s Budget on the horizon, Ms Reeves’ stewardship of the Treasury is set to come under even closer scrutiny, as Labour faces the challenge of maintaining credibility in the eyes of the markets – and the voters.
