Rachel Reeves insisted the turbulence in the financial markets underlined the need to go ‘further and faster’ in search of economic growth.

The UK chancellor faced questions in the Commons after the cost of government borrowing increased and the value of the pound fell in recent days, putting her plans for the nation’s finances at risk.

Reeves told MPs: ‘We have seen global economic uncertainty play out in the last week. But leadership is not about ducking these challenges, it is about rising to them.

‘The economic headwinds that we face are a reminder that we should – indeed, we must – go further and faster in our plan to kickstart economic growth.’

The chancellor was addressing the Commons following her return to the UK from a trip to China which was criticised by opposition MPs.

She said agreements reached in Beijing and Shanghai, where she held discussions on trade and investment, would be worth £600 million to the UK over the next five years.

But shadow chancellor Mel Stride said a ‘black hole has opened up in the public finances while (Reeves) was absent from her station’.

‘To give a sense of scale, the deal the chancellor has announced amounts to £120 million a year.

‘The rise in our borrowing costs due to her disastrous budget has added around £12 billion to our annual spending on debt interest alone – literally 100 times what she says she has brought back from Beijing.

‘That is money that cannot now go on the public priorities, £12 billion is enough to pay for 300,000 nurses, to cover Labour’s pernicious winter fuel payment cut for eight-and-a-half years.’

The situation was discussed at Cabinet, where Reeves updated her colleagues on the global and UK economy.

Downing Street said Reeves ‘reiterated that the government would continue to take an approach that was relentless in supporting growth and cracking down on waste and inefficiency’.

Reeves restated her commitment to her fiscal rules, which include meeting day-to-day spending through tax revenues.

But rising borrowing costs eat into the money available for public services, leaving Reeves faced with either slashing spending or hiking taxes again, something she has pledged not to do.

Ministers were offered some relief on Tuesday morning as the pound regained its footing after hitting fresh 14-month lows on Monday, while UK government bonds recovered some lost ground after a recent heavy sell-off.

By David Hughes, Nina Lloyd and Holly Williams

Press Association: Finance

source: PA

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