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British Chancellor Rachel Reeves ignored calls for her resignation, insisting to MPs that her economic plans could bring a “huge” reward and defending her visit to China last week.
In her first appearance in the House of Commons since market turmoil hit her economic plans last week, Reeves Her Conservative rival Mel Stride accused her of being part of a “Shakespearean tragedy”.
“To go or not to go is the question now,” Stride said. But Reeves, who was praised by Labor MPs, said she would set out more details in the coming weeks on a plan to revive the sluggish economy.
“If we get it right, the prize we will be offering to the British public will be huge,” she said. Reeves claimed that the recent bond market turmoil affecting UK borrowing reflects “global economic uncertainty”.
The Chancellor has come under increasing pressure to develop a plan to change the course of the economy.
UK borrowing costs have reached their highest level in 16 years amid growing investor fears of stagflation, suggesting a combination of weak growth and persistent price pressures.
The pressures in the UK market come amid a global sell-off in government bonds in recent weeks, partly fueled by fears that tariffs proposed by US President-elect Donald Trump would be inflationary.
The government bond market was stable after the chancellor's initial comments, with the 10-year bond yield steady at 4.89 per cent and well below last week's post-financial crisis high of 4.93 per cent.
Reeves insisted on Tuesday that she was “absolutely committed” to sticking to self-imposed fiscal rules, deflecting questions from MPs about whether she would be forced to cut public spending.
A recent increase in UK government borrowing costs has threatened to blow a hole in Reeves' promise to balance everyday spending with tax revenues in 2029.
Reeves also said building trade relationships with China was essential for growth, after Stride claimed she should have stayed in Britain to reassure markets rather than going to Beijing “with the begging bowl”.
“Not participating is not an option,” Reeves said, although she added that she had raised questions about human rights with China’s leaders and denounced the “completely baseless sanctions on British parliamentarians.”
Reeves' statement came amid growing unrest among Labor MPs over the Chancellor's handling of the economy, with many still deeply unhappy with her decision last year to scrap winter fuel payments for 10 million pensioners.
On Monday, No 10 took the unusual step of announcing that Prime Minister Sir Keir Starmer expected Reeves to continue in her role until at least the election, just hours after he refused to make such an assurance.
One newly elected Labor MP said: “Some people are looking at the polls and worrying about their seats. “There is a risk of Rachel Reeves becoming a lightning rod for what goes wrong, but I don’t think we’re there yet.”
The MP said Reeves should express some “regret” over her decision on winter fuel, even if she does not reverse it.
Another influential Labor MP said: “There has long been frustration about the Treasury, but I think the risk to Rachel's position is exaggerated. Keir cannot afford to lose her.
But the MP added that there was a “lack of clarity” about how the party planned to improve living standards. “It's all abstract, long-term. Policy risks are not communicated or managed effectively.
Starmer, a lawyer, has been building up his team's economic muscle in a move seen by some Labor MPs as an attempt to provide more counterweight in Number 10 to the Treasury.
Michael Elam, a Treasury veteran who was until recently a senior executive at HSBC, has a new role as Starmer's key adviser on international economic issues.
Olaf Henriksson Bell, another former Treasury official, was appointed to run Policy Unit No. 10.
Many Labor MPs believe Starmer and Reeves need to be more effective in explaining their policies, including “educating” MPs on the fact that Britain is not the only country facing problems in bond markets.
Sterling, whose bonds have been sold off this year as investors worry about the direction of UK public finances, fell 0.4 percent on the day to $1,216, taking its losses for the year to 2.9 percent.
Lee Hardman, chief currency strategist at MUFG, said Reeves' message was “designed to provide reassurance to the market.” But he added: “I don't think words alone will be enough.”
Additional reporting by Ian Smith
