Chancellor Rachel Reeves has faced a grilling over her trip to China at a time of economic turmoil, in what the Tories labelled “a crisis made in Downing Street”.
Facing MPs in the Commons, the chancellor hit back at claims from her Tory opposite number Mel Stride that she had “ducked the difficult questions by jetting off to Beijing”, as she vowed to “go further and faster in our plan to kickstart economic growth”.
Ministers were offered some relief on Tuesday morning as the pound regained its footing after hitting fresh 14-month lows on Monday, while UK government bonds recovered some lost ground after a recent heavy sell-off.
In a bid to calm the markets – as the rise in gilt yields eviscerates the £9bn of “headroom” left in the chancellor’s Budget, leaving her at risk of breaking her fiscal rules – Ms Reeves was reportedly ordering cabinet ministers to be “ruthless” in identifying public spending cuts.
But former Labour shadow chancellor John McDonnell warned that further spending cuts would amount to “political suicide” and risked turning an economic “crisis into a recession” by taking demand out of the economy.
Key Points
- Chancellor Rachel Reeves addresses parliament in bid to ease economic turmoil
- John McDonnell warns spending cuts would be ‘politically suicidal'
- Pound regains footing as gilt yields show signs of stabilising
- Comment | A sharp rise in a single economic indicator could be curtains for the chancellor
- Nigel Farage’s Reform UK just one point behind Labour, new polling suggests
Rachel Reeves says she is working closely with Bank of England
14:18
Andy Gregory
Rachel Reeves has said that the government worked closely with the Bank of England to ensure the country’s economy remains competitive.
Asked by Tory MP Sir Gavin Williamson whether she had spoken to Bank of England governor Andrew Bailey about what actions to take to improve financial stability, Ms Reeves said the pair spoke regularly:
“Indeed, he was on the delegation to China with me this weekend, and we work closely together to ensure that the British economy remains competitive in global markets,” the chancellor told MPs.
Chancellor tells MPs blaming her for market turmoil to ‘get real'
14:08
Andy Gregory
Chancellor Rachel Reeves told MPs to “get real” if they were blaming the government for global volatility in markets that has saw the cost of borrowing rise last week.
The chancellor was asked by Conservative MP Dr Luke Evans what she would say to financial markets to reassure them, as he suggested that the “fundamental issue” behind the recent turmoil was that “the markets don’t believe her plan for growth”.
She said: “There’s been a global volatility in markets. I don’t believe it reasonable to suggest that the reason why bond yields in the United States, in Germany and France have risen is because of decisions made by this government. I think the honourable member opposite should just get real.”
Tory MP asks whether China told chancellor that she was ‘doing a good job running UK economy'
14:05
Andy Gregory
In a somewhat bizarre intervention, Tory MP Esther McVey asked Rachel Reeves: “Did the Communist Party of China tell the chancellor she was doing a good job running the UK economy or a bad job running the UK economy when she was there?”
Ms Reeves replied: “I wasn’t seeking assurance from any foreign government of the performance of this government.”
Rachel Reeves refuses to rule out spending cuts
14:01
Andy Gregory
Chancellor Rachel Reeves has refused to rule out future spending cuts when pressed to do by SNP Westminster leader Stephen Flynn.
Ms Reeves told MPs: “I’m not going to write five years worth of budgets in the first six months of a Labour Government.
“But I’m absolutely committed to meeting the fiscal rules that I set out in the budget in October, because we know what happens when governments lose control of the public finances, and that is they crash the economy, and end up on that side of the House.”
Concerns raised over import of goods created using ‘slave labour from China’
13:59
Andy Gregory
Conservative former leader Sir Iain Duncan Smith asked whether the government will allow import of goods “that contain any slave labour” from China.
Sir Iain, who is one of a number of MPs sanctioned by China, told the Commons: “The reality I want to put to her is that while she was away, [clothing company] Shein refused, point blank in a select committee to answer the question whether they had slave labour in their supply chains, but the Government wants them to register here in London.”
He added: “So can I ask the chancellor to be clear now to the House about the government’s position on slave labour?
“Can she explain whether this government will allow any products or services or companies to align themselves here or import goods into here that contain any slave labour, no matter how important that import is?”
Chancellor Rachel Reeves replied: “This government is committed to working with international partners and businesses to ensure that global supply chains are free from human and labour rights abuses.
“As [Sir Iain] knows, under Section 54 of the Modern Slavery Act 2015, commercial businesses who operate in the UK and have a turnover of more than £36m are required to report annually on the steps they have taken, and quite right so because modern slavery is absolutely abhorrent and this government continues to take steps to deal with it.”
Budget has not worked, warn Lib Dems
13:53
Andy Gregory
Liberal Democrat Treasury spokesperson Daisy Cooper told MPs: “Let’s be blunt, the budget hasn’t worked. The Chancellor says that the government’s number-one mission is growth but to date there are no signs that the government is going to deliver it.”
Ms Cooper described a rise to employer national insurance contributions as “self-defeating – it undermines growth, it does not unleash it, and it piles pressure onto struggling small businesses and high streets”.
She told MPs there was now a “much-lauded visit to China, but the government itself said it is only worth £600 million to the UK over the next five years”, adding: “This really is small beer.”
Chancellor reiterates vow to stick to fiscal rules
13:52
Andy Gregory
Chancellor Rachel Reeves has vowed to stick to her previously stated fiscal rules, as the rising cost of government borrowing threatens to eviscerate the £9bn of headroom left in her autumn Budget.
Labour MP Dame Meg Hillier told the Commons: “Listening to the shadow chancellor [Mel Stride], you would think that the country was going to hell in a handcart.
“And doesn’t she agree with me that there is no time for panic, that it is perfectly possible to manage any pressures on the budget through astute management of public spending? And that compared with the years of austerity on the last side, we are a very, very long way from that approach?”
Ms Reeves replied: “I set out the fiscal rules of this government at the budget in October – that we would pay for day-to-day spending through tax receipts and that we will get debt down as a share of the economy. We remain committed to those fiscal rules and we will meet them at all times.”
Watch live: Rachel Reeves addresses controversial China trip amid market turmoil
13:49
Andy Gregory
Watch live as Rachel Reeves answers questions in the House of Commons, after returning from a trip to China criticised by political opponents for coinciding with a week of volatility for the pound and soaring yields on UK bonds:
Rachel Reeves vows to ‘go further and faster’ in plans to boost economic growth
13:42
Andy Gregory
Rachel Reeves has vowed to “go further and faster in our plan to kickstart economic growth” in a defiant signal to the markets as she addressed MPs.
The chancellor told MPs: “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 that plunged under the last governments.
“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.”
Rachel Reeves hits back at Tory criticisms of Labour’s economic plans
13:38
Andy Gregory
Chancellor Rachel Reeves has hit back at criticisms by her Tory opposite number Mel Stride, accusing the Conservatives of saying “absolutely nothing about what he would do” to ease the current economic turmoil.
In a reference to questions over Ms Reeves’ future, Mr Stride told MPs: “To go or not to go – that is now a question. The prime minister will be damned if he does, but he will surely be damned if he does not. The British people deserve better.”
But Ms Reeves replied: “The shadow chancellor is simply not serious. I’ve been on that side for 14 years, I think that usually when you have a statement you ask some questions. Now we heard a lot from [Mr Stride] about what he wouldn’t do. But we’ve heard absolutely nothing about what he would do.
“You can now see what happens when the leader of the opposition tells the shadow cabinet that they shouldn’t have any policies, because as far as I can tell the Conservative Party’s economic strategy is to say that the UK should not engage with the second largest economy in the world, or indeed with our nearest neighbours and biggest trading partners in the European Union.”
Tories accuse Labour of ‘losing control of the economy'
13:31
Andy Gregory
The Tories have accused Labour of “losing control of the economy” in what shadow chancellor Mel Stride claimed was “a crisis made in Downing Street”.
Mr Stride told MPs: “I know that the chancellor has been away, so let me update her on the mess that 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, they crippled businesses with colossal taxes, breaking all their promises. This is a crisis made in Downing Street.”
He added: “It should hardly surprise the chancellor that international markets are uneasy. The UK’s longterm borrowing costs have risen to their highest in almost 30 years. While the government was losing control of the economy, where was the chancellor?”
Accusing Ms Reeves of “ducking the difficult questions by jetting off to Beijing”, he said: “I believe in Labour circles they are calling it ‘the Peking duck’. Whatever was on the menu in China, was it really worth the unedifying sight of an increasingly desperate politician scampering halfway around the world with a begging bowl?”
Chancellor Rachel Reeves vows to unveil new details of plans for growth
13:25
Andy Gregory
Chancellor Rachel Reeves has insisted that the UK is “one of the best places in the world to invest” as she vowed to unveil further details of plans to boost economic growth.
“Next week I will be meeting with business leaders, investors and entrepreneurs at the World Economic Forum meeting in Davos to make the case that the UK is one of the best places in the world to invest.
“And in the coming weeks, I will be setting out further details of our plans to kickstart growth in the economy after the 14 years of failure from the party opposite.”
Chancellor says China has agreed to improve channels for communication with UK
13:22
Andy Gregory
Chancellor Rachel Reeves has said she raised human rights concerns with Beijing during her trip to China.
The chancellor told MPs: “We will confidently challenge on areas where we disagree. I expressed our country’s real economic and trade concerns to the Chinese, including trade imbalances and economic security.
“And I raised concerns about Russia’s illegal war in Ukraine, human rights and restrictions on rights and freedoms in Hong Kong, including the case of Jimmy Lai, and the completely unjustified sanctions against British parliamentarians.
“A key outcome of this dialogue is that we have secured China’s commitment to improve existing channels so that we can openly discuss sensitive issues and the ways in which they impact our economy.
“Because if we do not engage with China, we cannot raise our real concerns. This dialogue is just one part of our engagement with trading partners across the world.”
Rachel Reeves defends trip to China as she faces MPs
13:16
Andy Gregory
Chancellor Rachel Reeves has defended her trip to China as she warned that not engaging with Beijing “is simply not an option”.
The chancellor told MPs: “Growth is the number one mission of this Labour government, and to grow the economy we need to help Great British businesses export around the world – that includes to China.
“As the second biggest economy in the world, and our fourth largest trading partner, not engaging is simply not an option.
“That is why I led a delegation – including the governor of the Bank of England, the chief executive of the Financial Conduct Authority, and representatives of some of Britain’s largest financial services firms.”
The chancellor added: “This dialogue has delivered a set of tangible benefits to ensure that British firms have greater access to the Chinese market while safeguarding our national security – the first duty of any government.”
Rachel Reeves vows ‘relentless’ approach in cabinet meeting, No 10 says
13:11
Andy Gregory
Chancellor Rachel Reeves updated her colleagues on the global and UK economy during this morning’s cabinet meeting.
Downing Street said Ms Reeves “reiterated that the government would continue to take an approach that was relentless in supporting growth and cracking down on waste and inefficiency”.
Ministers were offered some relief on Tuesday morning as the pound regained its footing after hitting fresh 14-month lows on Monday, while UK government bonds recovered some lost ground after a recent heavy sell-off.
David Lammy says Rachel Reeves raised human rights concerns with China
13:06
Andy Gregory
Foreign secretary David Lammy has defended chancellor Rachel Reeves’ trip to China, insisting that she raised human rights concerns relating to Xinjiang and the case of Jimmy Lai during her visit.
Challenged by Tory MP John Cooper, who mockingly named the visit “Operation Kowtow”, Mr Lammy said: “Can I just remind the honourable gentleman that it was our last foreign secretary that had a pint with President Xi?
“The chancellor of the Exchequer was able to raise all of the issues – Jimmy Lai, the security law in Hong King, Xinjiang, and a whole range of issues. You are only able to do that by engagement.”
Kemi Badenoch’s ‘peasants’ remarks ‘not language’ the PM would use, No 10 says
12:53
Andy Gregory
Kemi Badenoch’s description of grooming gangs as “peasants” from “subcommunities” is not language the Prime Minister would use, Downing Street has said.
“I don’t think that’s language he would use,” the prime minister’s official spokesperson said.
Asked why, he said: “It’s not language he’s used, or indeed, I’d envisage him using.”
Kemi Badenoch blames ‘peasants’ from ‘sub-communities’ for grooming gangs abuse
12:41
Andy Gregory
Tory leader Kemi Badenoch has blamed “peasants” from “sub-communities” within foreign countries for the grooming gangs crisis.
Jessica Coates has more details in this report:
Slight relief for Rachel Reeves as demand holds in UK government bond auction
12:25
Howard Mustoe
The Treasury’s Debt Management Office sold £1bn of 30-year bonds today in a useful test for Rachel Reeves and the bond market’s tolerance for her budget.
Result: not great, but ok. The bonds were all sold; three times oversubscribed indeed, although with slightly weaker demand that previous auctions.
In the broader bond market, yields – the rate buyers demand for buying the debt, lower is better for the borrower, in this case the government – fell slightly. They are 0.006 per cent lower than yesterday on benchmark 10-year bonds, at 4.887 per cent.
Worldwide market unease ‘particularly intense in UK’, says consultancy chief
12:14
Andy Gregory
The market unease around UK government bonds appears to be linked to a delayed response to Rachel Reeves’ autumn Budget, the head of a prominent economics consultancy has suggested.
“It’s been a relatively dramatic couple of weeks for the gilts markets and for the pound,” Nina Skero, chief executive of the Centre for Economics and Business Research (CEBR), told the BBC.
“It’s been somewhat of a worldwide phenomenon, but it seems to be particularly intense in the UK.”
Suggesting that the current woes relate to a “delayed response to the very heavy tax and spend in the Budget”, Ms Skero warned that “we’re going to have to wait some months, maybe even some quarters, to see the real impact”.
Daily Star: ‘Should we be popping out for another lettuce?’
11:59
Andy Gregory
In a reference to its infamous stunt questioning whether Liz Truss would survive longer in Downing Street than a wilting lettuce, the Daily Star has now set under-fire chancellor Rachel Reeves in its sights, as editors asked whether they should once again be in the market for leafy greens.
STAR: Should we be popping out for another lettuce? #TomorrowsPapersToday pic.twitter.com/8zWFflsCnt
— Neil Henderson (@hendopolis) January 13, 2025
Comment | No, Keir Starmer is not going to sack Rachel Reeves – and nor should he
11:46
Andy Gregory
In his latest column, our chief political commentator John Rentoul writes:
It may be a silly question, but is the prime minister to blame for encouraging the speculation about Rachel Reeves’s future when he failed to answer it, twice, after his speech on the great opportunities of artificial intelligence?
This contradicted one of the unwritten rules of British politics, which is that chancellors are always “unassailable” – Margaret Thatcher’s description of Nigel Lawson – until they aren’t.
The reason for that is that prime ministers’ fates are tied to those of their most important minister. That is especially so in this case: Starmer and Reeves have been a double act for four years.
It would be disastrous for Starmer to dispense with his chancellor. It would in effect be a vote of no confidence in himself. It would be an attempt to write off the first six months of this government – but instead of starting again with a clean sheet, it would simply deepen the crisis and lead to pressure to change prime minister instead.
Tulip Siddiq faces new corruption probe in Bangladesh
11:34
Andy Gregory
UK anti-corruption minister Tulip Siddiq has reportedly been named in a second corruption probe in Bangladesh over a plot of land her family received from her despot aunt’s government.
The anti-corruption commission in Bangladesh has alleged Ms Siddiq used “her influence” while serving as an MP to acquire the land for her mother Sheikh Rehana and two other plots of land for her siblings, according to documents seen by Sky News.
However, a Labour source said Ms Siddiq totally refutes the claims and has not been contacted by anyone on the matter. They also said no evidence had been presented for the allegations.
Ms Siddiq is the niece of the Sheikh Hasina, the longest-serving prime minister of Bangladesh who is now in India after being ousted last year.
The latest claim is separate to a probe into allegations of embezzlement in a nuclear deal struck by Sheikh Hasina, in which Ms Siddiq has also been mentioned.
Our political correspondent Millie Cooke has the report:
Chancellor statement intended to calm troubled markets, says Tory MP
11:22
Andy Gregory
Tory shadow financial secretary to the Treasury Gareth Davies has denied the previous Conservative government had left behind a “terrible situation” for the chancellor and claimed that she “made it worse” with the autumn Budget.
Asked whether he would accept that her economic inheritance was not good, he told Sky News: “It was a lot better than it is today.”
Mr Davies added: “She needs to urgently get a grip of this and make sure she can calm nerves. I understand she’s coming to the House today under the guise of an update on her visit to China but let’s be clear what this is about: this is about her having to come out to calm markets, calm nerves because it’s clearly very troubling out there.”
Elon Musk’s popularity drops further in UK after grooming gangs interventions, polls suggest
11:08
Andy Gregory
Elon Musk has become even more unpopular in the UK following his interventions on the grooming gangs scandal, polling by YouGov suggests.
Polling conducted last week found that the billionaire’s net favourability rating had fallen five points since November to hit minus 51 per cent – with 71 per cent of the British public saying they had an unfavourable view of the Tesla owner.
And despite his campaign against the government and support for far-right activist Tommy Robinson over the issue of grooming gangs, polling suggests the British public trust him less with regards to the scandal than Sir Keir Starmer.
Just 15 per cent of people surveyed said they trust Mr Musk on the issue, compared with 69 per cent who said they did not.
Nigel Farage had a slight edge over Sir Keir in ratings of his trustworthiness on the issue, while a larger proportion of voters appeared undecided on whether to trust Tory leader Kemi Badenoch.
Who do Britons trust on the issue of grooming gangs?
— YouGov (@YouGov) January 13, 2025
Elon Musk: 15% trust / 69% distrust
Nigel Farage: 26% trust / 57% distrust
Keir Starmer: 26% trust / 58% distrust
Kemi Badenoch: 18% trust / 52% distrusthttps://t.co/bKlzOqujDY pic.twitter.com/uLzpqCr2o1
Full report: Reeves warned of ‘political suicide’ if she orders spending cuts
10:54
Andy Gregory
Embattled Chancellor Rachel Reeves has been given a stern warning by ex Labour Shadow Chancellor John McDonnell not to impose big welfare cuts to head off the economic crisis.
Leading left-wing MP Mr McDonnell said such a move would be ”politically suicidal” and would result in a backlash from hard-up voters and trigger a recession, he said.
Britain had 165 billionaires and it was time to make them pay more tax, he added.
Simon Walters has the full report:
Former Tory minister warns against comparisons with Truss mini-Budget
10:37
Andy Gregory
David Gauke, a former Tory chief secretary to the Treasury, has warned that there is “clearly a problem with how the UK is perceived by the markets”.
Writing for the New Statesman, he said: “When looking at recent market movements, we should not get carried away with comparisons with the events of autumn 2022 after the Truss/Kwarteng mini-Budget.
“It is true that bond yields are a little higher now than they were then, but the gap between bond yields and the Bank of England base rate was much greater then. As for sterling, it has fallen against the dollar but is still much higher than the near parity that was reached in the aftermath of the mini-Budget.”
“There is, however, clearly a problem with how the UK is perceived by the markets.
“Much of that can be put down to Labour’s inheritance in that we have very high levels of debt following Covid and Russia’s invasion of Ukraine (to be fair, that is not really the Conservatives’ fault either), and very considerable pressures on public spending (where the Tories have less clean hands).
“This left the UK vulnerable to any periods of market turmoil.”
Rachel Reeves says government focused on mission to grow economy
10:25
Andy Gregory
Chancellor Rachel Reeves has insisted the government is focused on its “number one mission to grow the economy”, as she prepares to defend her trip to China.
A post on her X account said: “This government is focused on our number one mission to grow the economy. That means engaging pragmatically with international partners and always putting the UK’s national interest first.
“I will be updating Parliament on this engagement later today.”
Who could be in the running to replace Rachel Reeves as chancellor?
09:59
Andy Gregory
In football manager parlance, the dreaded vote of confidence from the club chairman often shortly precedes an inevitable sacking. So when Keir Starmer said on Monday he has “full confidence” in his beleaguered chancellor Rachel Reeves, tongues started wagging on her future.
It was noticeable that the prime minister had to be asked twice before he answered the question, and he avoided saying her job was guaranteed until the next election while on camera.
Only three hours later, at an off-camera briefing, did the Downing Street official spokesperson say Ms Reeves will be chancellor “for the whole of this parliament”. That’s not the same as the prime minister doing it.
Questions over whether Ms Reeves will survive would have been unthinkable six months ago. But with the economy on the brink of a recession, interest rates set to rise and business confidence in the government at its worst point since the Covid pandemic, someone will have to take the blame.
But the question is, who would be able to step in to fill her shoes if she is pushed out with turbulent bond markets and a falling pound?
Our political editor David Maddox reports on five possible names:
Farage’s Reform UK just one point behind Labour in damning new YouGov poll for Starmer
09:49
Andy Gregory
Reform UK is now within touching distance of Labour, a new poll has shown, as Sir Keir Starmer has been dealt a new blow when it comes to confidence in his leadership of the country.
In the first YouGov poll since the general election, Labour’s support has plummeted, while Reform’s has steadily grown to just one point behind Sir Keir’s party.
Meanwhile, the Tories have been pushed into third place just two months after Kemi Badenoch was elected leader.
The survey, conducted for Sky News, puts Labour on 26 per cent, Reform UK on 25 per cent, the Conservatives on 22 per cent, the Liberal Democrats on 14 per cent and the Greens on 8 per cent.
Our political correspondent Millie Cooke has the full report:
Starmer holds cabinet meeting ahead of Reeves addressing MPs
09:46
Andy Gregory
Sir Keir Starmer’s cabinet is meeting this morning, as instability in the markets heaps pressure upon Rachel Reeves.
The chancellor is also set to face MPs in the House of Commons today.
Spending cuts would push voters towards Reform, warns veteran MP
09:44
Andy Gregory
Former Labour shadow chancellor John McDonnell has warned that spending cuts could push voters into the arms of Nigel Farage’s Reform UK.
Speaking to BBC Radio 4’s Today programme, the veteran MP said: “It’s not just us [facing market turmoil], it isn’t Britain isolated. We’ve seen what’s happened with regard to [the markets’] reaction to the potential of Trump coming in and tariffs being introduced.
“So there is a worldwide phenomenon here, there’s no doubt about it. But they are picking over some of the decisions that have been made by the government.
“And there, at those stages, when we were preparing for government, to be frank we were looking to the Bank of England who were cooperating with us to see us through the turbulence.
“There are two groups of people who make judgements on an incoming government – one is the international markets … but actually the most important people are the electorate.
“I think what has to happen here is the electorate have to be protected. Otherwise I’m afraid we’re looking at a level of disillusionment which then turns people towards, unfortunately, Reform. And I think that would be a disaster for the country.
“So I think it’s important to look at what the electoral response would be to another round of cuts.”
Pound regains footing as gilt yields show signs of stabilising
09:40
Andy Gregory
The pound regained its footing on Tuesday morning, after hitting fresh 14-month lows on Monday, as UK government bonds recovered some lost ground after a recent heavy sell-off.
Sterling held firm at $1.22 in morning trading, having sunk to its lowest level since November 2023 in recent days.
Government borrowing costs showed signs of stabilising, with yields on 10-year UK government bonds – also known as gilts – down three basis points at 4.86 per cent.
The yield on 30-year gilts struck its highest level for 27 years on Monday, and 10-year yields rose to fresh highs not seen since 2008.
Yields are a key indicator of market confidence, moving inversely to bond prices. They rise when investors are less willing to own the debt, meaning they will pay a lower price for the bonds.
Minister insists Rachel Reeves doing ‘good job’ amid ‘difficult economic headwinds'
09:38
Andy Gregory
Security minister Dan Jarvis defended the chancellor as he faced broadcasters on the Tuesday morning media round, saying she is doing a “good job” in difficult circumstances inherited by the previous government.
“The chancellor has been in China over the course of the weekend, I think that was the right thing for her to do and she’s getting on with doing a difficult job of delivering economic growth for the country,” he told Sky News.
“These are difficult economic headwinds that we’re dealing with at the moment, but I think she’s doing a good job and I think the prime minister thinks that as well.”
Rachel Reeves set to be grilled by MPs
09:36
Andy Gregory
Rachel Reeves will move to reassure turbulent financial markets amid high Government borrowing costs as she faces a grilling from MPs on Tuesday.
The chancellor will answer questions in the Commons for the first time since her return from a trip to China criticised by political opponents for coinciding with a week of volatility for the pound and soaring yields on UK bonds.
Current economic turmoil will pass ‘fairly quickly’, John McDonnell suggests
09:25
Andy Gregory
Former Labour shadow chancellor John McDonnell has suggested that the current economic pressure will pass “fairly quickly” in the wake of Donald Trump’s inauguration and the upcoming German elections.
Describing the current market turbulence as a “crisis”, he told BBC Radio 4’s Today programme: “But I actually do think this will shift fairly quickly with the election of Trump and Trump coming into power, and then remember we’ve got the German elections coming up as well, and I think the focus might well then be on Germany and Europe overall.”
Pressed on whether he meant the chancellor must “hold her nerve”, Mr McDonnell his advice would be: “I think the scene was set to a certain extent before the election when we didn’t really have a thorough and open debate about the state of the economy and the options that we had available to us.
“I wouldn’t have ruled out the increases in income tax and wealth taxes on the wealthiest in our society the way it was, and I wouldn’t have ruled out increasing corporation tax.
“So we sort of boxed ourselves in to a certain extent.”
Comment | A sharp rise in a single economic indicator could be curtains for the chancellor
09:20
Andy Gregory
If this week’s update to the consumer prices index shows inflation is up by more than 3 per cent, it’s all over for Rachel Reeves, predicts our chief business commentator James Moore.
He writes: Could Wednesday’s inflation data be the end of the chancellor? If that sounds like hyperbole, let’s work it through.
“We are in the midst of a very real economic crisis, and the next update of the Consumer Prices Index (CPI) will have a very real bearing on that.
“It could be the most consequential release since inflation peaked at a shattering 11.1 per cent in October 2022.”
John McDonnell warns spending cuts would be ‘politically suicidal'
09:14
Andy Gregory
Chancellor Rachel Reeves has been warned that spending cuts would amount to “political suicide” and risk turning an economic “crisis into a recession”.
As the chancellor lays the ground for spending cuts in order to avoid breaking her fiscal rules after the rising cost of borrowing eviscerated the headroom left in her Budget, former Labour shadow chancellor John McDonnell told BBC Radio 4’s Today programme: “There is obviously a problem.
“There’s turbulence in the international markets and we’ve just got to see this through. The way you do that is – you don’t turn to cuts, certainly, because not only will that, I think, be politically suicidal, it would undermine the political support upon which Labour got elected.
“But in addition to that you would be taking demand out of the economy, and you would be looking at in doing that turning a crisis into a recession.
“So I think you just have to see through the turbulence that’s in the markets and, in this instance, I think you need to look to the Bank of England to intervene if necessary.”
Mr McDonnell was among seven MPs to have the Labour whip removed in July after rebelling against Sir Keir Starmer over the two-child benefit cap.
Reeves to address Commons as she returns from China trip to face economy woes
09:09
Andy Gregory
Chancellor Rachel Reeves is set to make a statement in the Commons, as she returns from her trip to China to face a wave of growing economic unease.
As speculation swirled on Monday over the chancellor’s future in No 11, the Liberal Democrats urged Ms Reeves to hold an emergency meeting with banks to reassure mortgage holders.
The party’s Treasury spokesperson, Daisy Cooper MP, warned that the October budget “has not worked” and said that “many will be worried”.
“Rachel Reeves can no longer sit on her hands as this turmoil threatens to have real consequences for millions of homeowners,” she added.
Downing Street insists Rachel Reeves will be chancellor ‘for whole of this parliament’
09:03
Andy Gregory
Downing Street has insisted that Rachel Reeves will be the chancellor “for the whole of this parliament” as speculation mounted that Sir Keir Starmer may sack her.
The vote of confidence came on Monday afternoon after Sir Keir had appeared reluctant to back the beleaguered Ms Reeves, amid mounting pressure on Ms Reeves as the value of the pound fell and government borrowing costs remained high.
He told journalists that she has his full confidence and is doing a fantastic job, but avoided the question the first time it was asked and then dodged questioning over whether his chancellor will still be in post at the next election.
Millie Cooke and David Maddox have more details:
09:00
Andy Gregory
Good morning, we’ll be using this blog to bring you the latest updates on UK politics, as chancellor Rachel Reeves addresses MPs in a bid to restore economic calm amid turbulence in the markets.
