Rachel Reeves will remain in post “for the whole of this Parliament”, Downing Street said, as the Chancellor faced criticism over an economic storm that saw the Pound lose further ground against the Dollar and the cost of long-term Government borrowing hit a new high on Monday.
British 30-year government bond yields jumped to a fresh 27-year high, extending a gilt market sell-off into a second week in a fresh blow to the Chancellor.
Thirty-year gilt yields opened around 6 basis points higher on the day to hit a high of 5.472%, the highest since 1998, before easing back to show a roughly 4 bps rise.
British government borrowing costs leapt last week on worries about the Government’s plans to sell more debt against a backdrop of a slowing economy and inflationary pressures in the United States once Donald Trump takes over the White House.
The pound at 9am was 1.2141 dollars compared to 1.2212 dollars at the previous close. The euro at 9am was 0.8417 pounds compared to 0.8383 pounds at the previous close.
The growing economic woes sparked warnings that mortgage rates could be pushed up. Experts have warned some lenders have started “edging up” mortgage rates.
Sir Keir Starmer on Monday gave his full backing to Ms Reeves, who was returning from a trip to China to help boost growth, despite the UK’s economic woes saying she had his “full confidence”.
No10 later confirmed she would be Chancellor “for the whole of this Parliament” after Mr Starmer had twice declined earlier to say she would stay in the role until the next general election.
Asked why the Prime Minister had been unable to confirm whether her long-term future was secure, his official spokesman said: “You heard from the Prime Minister this morning.
“He was very explicit (that) he has full confidence in the Chancellor and he’ll be working with her in the role of Chancellor for the whole of this Parliament.”
Cabinet Office minister Pat McFadden, one of Sir Keir Starmer’s closest allies, dismissed speculation that Ms Reeves could be removed as Chancellor amid talk he would be a frontrunner to fill her job.
He admitted that her controversial Budget, including a £40 billion tax raid, had taken some “punches” but defended it raising £70 billion to pour into public services, particularly the ailing NHS which is struggling in another winter crisis.
Asked on LBC Radio if the media would be speaking to him as Chancellor soon, Mr McFadden said: “No, you won’t.
“Rachel Reeves is the Chancellor for a good reason. She is the person qualified to do the job.
“When we came into office six months ago, we came in as a good team , we didn’t have any of the rivalries and things that had afflicted other governments and we govern as a good team.
“Rachel Reeves is doing a good job with the support of the whole Cabinet.”
Pressed whether he was interested in becoming Chancellor, he added: “I’m very happy doing what I’m doing.”
But shadow chancellor Mel Stride said Ms Reeves’ visit to China was “tone deaf” and she should have been “reassuring” markets in the UK.
He told Sky News’s Sunday Morning With Trevor Phillips: “The markets move fairly quickly, and sentiment and confidence is at the heart of the approach that a good Chancellor should take.
“Now, if you absent yourself and go halfway around the world when bond yields are rocketing up, particularly in this country, with very serious consequences, then you need to be at your station reassuring those markets and I’m afraid it’s rather tone deaf to not have got that in the first place.”
He claimed it would cost an additional £12 billion a year to pay for national debt as result of market change that “has real implications for people”.
But Mr McFadden argued that it would have been a “bad mistake” for Ms Reeves to have called off her trip to China to stay in the UK to deal with the growing economic woes.
“It is right that she went,” he added.
“China is a trading nation like we are, we need a trading relationship with China so it was right that she went and beat the drum for British business.”
Ms Reeves has defended her fiscal rules, and her Budget, as “non-negotiable” amid criticism from business chiefs for the £25 billion hike in National Insurance for employers which some claim could hit recruitment.
Experts have said pension schemes are in a “robust position” to deal with the soaring cost of Government borrowing and falling Pound.
