Chancellor of the Exchequer Rachel Reeves has vowed to work “even faster” to improve economic growth after market turmoil raised the cost of servicing Britain’s debt.
Pressure on public finances has increased in recent days after the government’s borrowing costs hit the highest level in years.
Mel Stride, the Conservative shadow chancellor, called it a “Downing Street-induced crisis” and said business tax increases in October’s budget had worsened the outlook for the UK economy.
Mr. Reeves said he was under “no illusions” about the scale of the challenge to the economy.
He is expected to bring forward the publication of Labour’s promised industrial strategy within the next two weeks.
The Prime Minister was speaking in the House of Commons after returning from a visit to China to promote investment.
In the debate, he accused Tory critics of ignoring the “global volatility” behind rising borrowing costs in other countries such as the US, Germany and France.
“The economic headwinds we are facing are a reminder that we must accelerate our plans to accelerate economic growth, which plummeted under the previous government,” she told MPs.
Mr. Reeves has promised to launch a new economic package after next week’s Davos meeting.
The BBC reported that the industrial strategy promised in Labour’s manifesto is now being “fast-tracked” to boost growth.
Sector-specific announcements will be rolled out in the coming weeks, including this week’s Artificial Intelligence Acceleration Strategy.
Mr Reeves is at a critical juncture as chancellor as investors demand higher returns on British bonds (known as gilts).
Gold yields, or the interest rates governments pay back to investors, are a key indicator of market confidence.
On Tuesday, the yield on the 30-year Treasury note was 5.42%, near its highest level since 1998. Meanwhile, the yield on government bonds due in 10 years was 4.87%, near the highest level since 2008.
If left unchecked, the UK’s rising borrowing costs could result in a £10bn increase in annual debt interest by 2029-30, taking away £10bn of headroom, contrary to the Chancellor’s self-imposed fiscal rules. There is sex.
And if the Treasury runs out of fiscal space, spending will be squeezed rather than tax increases, Reeves’ aides told the BBC.
Speaking in the House of Commons, Mr Stride accused the government of “neglecting the economy” and “hurting business” by increasing employer national insurance (NI) contributions.
“Growth has completely collapsed, inflation is rising and affecting millions of people, interest rates remain high for an extended period of time, and business confidence is at rock bottom,” he added.
“This is a crisis created in Downing Street.”
Conservative MP Luke Evans added to his criticism, arguing that rising bond yields showed “markets don’t believe in his growth plans”.
But Mr Reeves responded by insisting there had been “global fluctuations in the market” and calling on Mr Evans to “understand the reality”.
“I don’t think it’s reasonable to attribute the rise in bond yields in the US, Germany and France to government decisions,” he said.
The prime minister spent the weekend in China seeking new investment, prompting claims he was bowing to Beijing and avoiding embarrassing questions in parliament.
In the debate, Mr Reeves claimed that the agreement reached during his visit to China was worth £600m to the UK over the next five years.
But Stride argued that the current high debt interest costs would be “100 times the amount she claims she brought back from Beijing.”
Liberal Democrat Treasury spokeswoman Daisy Cooper claimed the benefits from the new deal with China amounted to “just five hours of spending on the NHS”.
Mr Cooper claimed Mr Reeves’ budget proposal was “not working” and said the NI increase was “self-defeating” and a blow to struggling small businesses.
Mr Reeves defended the visit as a win for British business, saying the government had secured new agreements on “vaccine approvals, fertilizers, whiskey labeling, legal services, cars and accounts”.
She claimed the visit would allow her to confront China on human rights and trade issues.
“You can’t ask difficult questions unless you’re there,” Reeves said.
Sir Keir Starmer said on Monday he had “full confidence” in Mr Reeves and that the government was adhering to fiscal rules.
But Conservative leader Kemi Badenoch accused him of refusing to back him after he refused at a press conference to give specifics on whether he would take up the post at the next election.
Downing Street later confirmed that the Prime Minister intends to keep Mr Reeves in the role for the remainder of this parliamentary session.
