Reeves vows to stand by fiscal rules to achieve stability despite market turmoil
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UK chancellor made comments during visit to China where agreements were made worth £600m to UK economy. Rachel Reeves vowed to stand by her “non-negotiable” fiscal rules as she arrived in China for a trip overshadowed by market turbulence at home. The UK chancellor declined to comment extensively on the financial markets in the UK during a visit to bicycle-maker Brompton’s flagship Beijing store on Saturday, but said the rules she had set for herself in October were essential for economic stability.
She said: “The fiscal rules laid out in the budget are non-negotiable. Economic stability is the bedrock for economic growth and prosperity.”. This week, the pound briefly fell to a 14-month low against the US dollar after a sell-off in the bond market fuelled investors’ anxiety about UK assets. Gilt yields rose to their highest level since 2008, in effect increasing the cost of government borrowing, which fuelled concern that the chancellor would be unable to meet her rules on debt and spending without imposing deeper cuts than she had already planned.
The spending review, due later this year, is already expected to require departments to make efficiency savings worth 5% of their budgets. But with more money being spent on servicing government debt, that figure could end up being even higher, given Reeves has previously ruled out further tax rises. The Guardian reported this week that steeper cuts to public services were being considered while the Telegraph reported that disability benefits faced billion-pound cuts.
