Reeves pledges to act to respect fiscal rules amid rising borrowing costs

Rachel Reeves said she would “take steps” to meet her budget rules following turmoil in the gilt markets.

Rising government borrowing costs have sparked fears the chancellor will be unable to meet her debt and spending targets, which would require either tax rises or deeper cuts expenses when it presents its financial report at the end of March.

Speaking to reporters in Beijing, where she is seeking to rebuild economic ties with China, the chancellor refused to make “ongoing comments” on markets but insisted her fiscal rules were “non-negotiable “.

She added: “We will take steps to ensure that we comply with these budgetary rules.”

This action would include deeper spending cuts than the 5% efficiency savings already planned for the spending review due to be published later this year, while cuts to the welfare bill would be also under study.

The chancellor had previously ruled out further tax rises after raising taxes by £40 billion in October's budget.

Turbulence in government bond markets, where yields rose to their highest level since 2008 earlier this week, overshadowed the chancellor's trip, with opposition parties saying she should have stayed in the UK. United to solve problems in the markets.

The visit, during which she met Chinese Vice President Han Zheng and Deputy Prime Minister He Lifeng, is the first high-level economic meeting between Britain and China since 2019.

It follows Sir Keir Starmer's own meeting with Chinese President Xi Jinping at the G20 late last year, as Labor sought to thaw relations with China following the more frosty tone set by the previous government .

At Saturday's meetings, Ms Reeves hailed the trip as an “important step” in Labour's re-engagement with China, saying she had secured deals worth £600m for the UK economy over the next five years.

Speaking after her meeting with Mr. He, the Chancellor said: “The results we agreed on today represent pragmatic cooperation in action.

“They represent common ground found in areas such as financial services, trade, investment and climate.”

She added that “re-engagement” with China “already puts us on track to deliver up to £1 billion of value to the UK economy”.

The agreements reached on Saturday relate in particular to financial services, agri-food and cultural exports, as well as other areas.

But she also stressed that economic ties must not weaken national security, and said both countries had an “obligation to be frank with each other when we disagree.”

As well as repairing relations with Beijing, the new government has promised to “challenge” China if necessary, amid long-standing human rights concerns over the treatment of Uyghur Muslims, restrictions on freedoms in Hong Kong and his support for the Russian war in Ukraine.

Asked by journalists in Beijing whether closer ties with China carried a risk for the UK, Ms Reeves said: “We need to make sure we have pragmatic and good relationships with countries around the world. It is in our national interest.

“That’s what our allies around the world are doing and that’s what I will continue as Chancellor, always acting in the national interest while seeking to help British businesses export overseas.”

After the meeting with Mr. He, the chancellor said she discussed national security issues, as well as Russia's invasion of Ukraine and concerns about human rights in Hong Kong.

She said: “Not every conversation will be easy. However, it is essential and in the UK’s national interest that, as two major economies, the UK and China commit to building a stable and pragmatic bilateral relationship.”

The Treasury said Ms Reeves explicitly raised the case of British national and pro-democracy activist Jimmy Lai, who has been detained in Hong Kong since 2020, as well as allegations of forced labor in Xinjiang and Chinese government sanctions against the Kingdom. -United. parliamentarians.

Opposition parties criticized the chancellor's trip.

Shadow chancellor Mel Stride said she had “got her priorities badly wrong” and “was halfway around the world” while “her economic decisions here take us back to the 1970s” .

Liberal Democrat vice-president Daisy Cooper urged the chancellor to “come back now to urgently tackle the current market crisis and announce a serious plan for growth”.