Finance Minister moves to reassure markets after UK borrowing costs soar | economic policy

Rachel Reeves will not renege on her promise to borrow money only for investment purposes even as gold bond yields rise to their highest level since the financial crisis, her representative has said.

Chancellor of the Exchequer Darren Jones has told lawmakers the Prime Minister will not borrow money to pay for day-to-day spending even as rising borrowing costs in the UK make it much more difficult to comply with financial rules.

He was answering urgent questions from the House of Commons about recent market turmoil, which has driven Britain's borrowing costs higher, lowered the pound and prompted calls for Reeves to cancel a long-planned trip to China.

Jones told the Commons: There is no doubt about the government's commitment to economic stability and sound public finances. This is why meeting financial rules is non-negotiable.

He added: [The Conservatives] Having hoarded the credit card of the country, we have entrusted it to this party to deal with it, and we will deal with it. That is why these financial rules are non-negotiable.

Jones said concerns about the UK and global growth had pushed 10-year government bond yields well above the record high set in the aftermath of Liz Truss' mini-budget in 2022. The pound was also hit by a sell-off. , which fell to a 14-month low against the dollar on Thursday morning.

However, after Jones' remarks, it fell again by 0.5 cent, and bond interest rates also reversed their intraday upward trend.

Still, experts say the recent rise in the cost of debt could wipe out any free space Reeves may have running afoul of key financial rules. This will force us to cut spending or raise taxes further later this year.

Joness Commons' appearance came hours after the Treasury issued a rare statement designed to reassure markets, insisting Reeves had a firm grip on public finances.

Prime Minister Jones said the UK was experiencing economic headwinds like other countries. Many experts have warned about the impact of new trade tariffs from incoming US President Donald Trump.

He said it was normal for yields and gold bond prices to vary during broader movements in global financial markets, including in response to economic data. Movements in financial markets in recent months have been primarily driven by anticipated data and global geopolitical events as markets adapt to new information.

But the Conservatives accuse Labor of squeezing the economy with higher debt and higher taxes, as Reeves suggested in last year's budget.

Shadow chancellor Mel Stride said: The chancellor has overstated taxes, increased borrowing by an average of $32 billion a year across the forecasts and conveniently tweaked the fiscal rules to allow him to do this. High debt and low growth are now causing real concern among the public, businesses and markets.

The Conservatives and Liberal Democrats are now urging Reeves not to visit China on Thursday. She will spend several days with Bank of England governor Andrew Bailey to boost international investment.

Jones added that he would not be canceling the trip. The Prime Minister is scheduled to visit China, a move that has been well documented for several weeks. [and is] It was an important visit in terms of economic trends and investments here in the UK.

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