Rachel Reeves defends China trip as Labour MPs say ‘out of her depth’ | Politics | News

Under-fire Chancellor Rachel Reeves has defended her decision to fly to China while the UK economy is in turmoil by insisting the trip will raise living standards.

But the visit was branded “pointless” by senior Tory Sir Iain Duncan Smith, who said: “The murderous, brutal, law-breaking, communist regime in China will not deliver the growth the Labour government craves.”

And there is growing anger among Labour MPs who believe Ms Reeves is “out of her depth” and should never have been appointed to her Treasury job.

The Chancellor is today meeting Chinese Vice Premier He Lifeng in Beijing and tomorrow will be in Shanghai, China’s economic centre. She is the most senior British politician to visit the Communist nation since former Prime Minister Theresa May in 2018.

It comes as the cost of Government borrowing reached its highest level for 16 years, stoking fears Ms Reeves will be forced to impose brutal spending cuts on vital public services to avoid further tax rises.

Chaos on financial markets continued yesterday as the yield on government bonds, or gits, rose again before falling back slightly. Higher yields mean it is more expensive for governments to borrow money.

Opposition MPs demanded Ms Reeves return home to deal with the crisis but she insisted: “By finding common ground on trade and investment while being candid about our differences and upholding national security as the first duty of this government, we can build a long-term economic relationship with China that works in the national interest.”

The Chancellor said the visit was part of the Government’s “plan for change” which is about “growing the economy and raising living standards.”

Ms Reeves, accompanied by Bank of England Governor Andrew Bailey, Chief Executive of the Financial Conduct Authority Nikhil Rathi and representatives from some of Britain’s biggest financial services firms, will hold talks about boosting trade and investment. She also said she would raise human rights abuses in Hong Kong and urge China to end economic support for Russia’s invasion of Ukraine.

Conservative Shadow Business Secretary Andrew Griffiths said the Chancellor had damaged growth by imposing tax hikes of £36.2 billion, including increasing employer National Insurance contributions.

He said: “To deal with Labour’s choices, businesses will have to either cut jobs, cut investment or raise prices. This is not how you achieve economic growth.”

A Labour MP told the Express that colleagues were losing confidence both in Ms Reeves and in the Prime Minister, Sir Keir Starmer, who appointed her.

The MP said: “Rachel has bet the house on growth, but growth is not coming and she hasn’t said how she is going to bring it about.”

But they said Sir Keir had a track record of appointing the wrong people, including former Transport Secretary Louise Haigh who was forced to resign after it emerged she pleaded guilty to a fraud offence a decade ago.

The Labour MP said: “The view in the tea-room is that Reeves is part of a wider issue that he has selected the wrong people.”

Ms Reeves has vowed not to increase taxes further or borrow more to pay for day-to-day spending, but with the cost of borrowing increasing this suggests she will be forced to cut spending to balance the books. Chief Secretary to the Treasury Darren Jones repeatedly refused to rule out cuts when pressed by Tory MPs in the Commons this week.

Instead he said the Treasury would “go line by line through every pound of taxpayers’ money and public spending”. Ministers are being summoned to explain how every pound they spend contributes to the “missions” set out by Sir Keir when he first became Prime Minister, which include improving the NHS, cutting crime and improving schools.

Ms Reeves is bracing herself for a report on the state of the public finances due from the Office for Budget Responsibility on March 26, and is due to reveal her spending plans in June although there are rumours at Westminster that she could make an emergency statement before then.

Industry leaders say financial markets are losing confidence because tax hikes and increases to the minimum wage are and forcing employers to cut back on investment and threatening growth. The Institute for Directors (IoD), which represents smaller firms, says more than eight out of ten of its members expect National Insurance bills to rise, and half of these will give staff smaller wage increases as a result.

IoD Chief Economist, Anna Leach: “There is an overall sense of concern and uncertainty. Many are struggling with sharply rising employment costs and are increasingly looking at overseas market opportunities where they can, for both business and hiring.”

She added: “We understand the need to fix public finances but worry that the impact on the private sector, combined with inheritance tax and business property relief reforms, will undermine growth and ultimately public finances.

“Recent volatility in the gilt market reflects this concern.”

Further misery for homeowners is also threatened. Matthew Ryan, head of market strategy at global financial services firm Ebury, said elevated gilt yields are likely “to be reflected in higher mortgage rates, which would provide a further squeeze on household disposable incomes”.