'Don't panic,' Chancellor Rachel Reeves urged after Pound's fall and rise in cost of Government borrowing
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Rachel Reeves was urged not to “panic” following the fall in the Pound and rise in the cost of Government borrowing. In a statement to the Commons on her recent trip to China, the Chancellor stressed that she would stick by her fiscal rules despite the fresh pressure on the public finances.
She also defended her visit to Beijing, to boost trade between China and Britain, having rejected calls to call off the trip to deal with the economic woes unfolding in the UK. The Pound, which had risen early on Tuesday, later dipped back below 1.22 US dollars, hovering close to 14-month lows as government borrowing costs continued to come under pressure.
Yields on government bonds, also known as gilts, gave up a tentative recovery, edging back up to the multi-decade highs hit in recent days. The 10-year gilt yield edged up to 4.9%, the highest since 2008, and while 30-year long-dated gilts held firm at around 5.4% it was still close to a 26-year high.
Some mortgage rates are also nudging up. The borrowing blow is believed to have largely wiped out the Chancellor’s fiscal headroom, which have sparked warnings she will have to raise taxes again, cut public spending or break her fiscal rules. Ms Reeves stressed: “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.
