Reeves urged to cancel China trip amid bond market turmoil – business live | Business

Several Labour MPs argued during today’s urgent question that the Conservative Party should take responsibility for the state of the public finances.

John Slinger, MP for Rugby, argues they should be apologising, rather than criticising.

Darren Jones says it’s very important for the Conservatives to apologise. But the more they “grunt and groan” and claim everything was wonderful under them, the better for Labour, so “long may it continue”.

Tory MP Patrick Spencer, though, doesn’t sound very apologetic, accusing Jones of only wanting to talk about the past.

Spencer tells MPs that borrowing costs are up, busines confidence is down, and growth is going nowhere.

He tells MPs that it is time to admit that the “lefty economic experiment” is failing – the solution is to cut taxes and spending.

Jones insists that fiscal responsibility isn’t a lefty ideology – it’s what the British people expect.

Lib Dems call for emergency fiscal statement

Julia Kollewe

The Liberal Democrat Leader, Ed Davey, has called on the chancellor to cancel her trip to China and instead make an emergency fiscal statement to parliament cancelling the national insurance hike planned for April, to boost economic growth and give the Bank of England more room to bring interest rates down.

The increase in employers’ national insurance costs is expected to push inflation slightly higher, as some companies have already signalled price rises (see earlier post), while the national minimum wage is also going up in April, by 6.7%.

Higher inflation will make it harder for the central bank to make further rate cuts. Markets are now expecting two quarter-point reductions this year, rather than three as forecast before December.

Davey said:

“Instead of jetting off to China, the chancellor should urgently come before the House of Commons to cancel her counterproductive jobs tax and set out a real plan for growth.

“The country is paying an ever-higher price for the total mess the Conservative Party made of our economy, and the chancellor needs to realise that she’ll never dig us out of this hole without a far more ambitious plan to grow our economy, including rebuilding trade with Europe.

The government’s misguided jobs tax is hurting businesses and hitting investment badly, meaning it will hold back growth while failing to raise the funding the chancellor claims for the NHS.

The chancellor should look instead at our plans to raise revenue without hitting jobs and growth, by raising taxes on the profits of the big banks, social media giants and online gambling firms – all of which are making eye-watering profits while ordinary families struggle.”

Liberal Democrat MP Max Wilkinson brings up Liz Truss’s decision to issue “cease and desist” letters to those who accuse her of crashing the economy.

He asks Darren Jones to compare and contrast Truss’s “disastrous” mini-budget with what’s being discussed today.

Darren Jones says he can’t comment on legal proceedings.

But, one of the “huge lessons” for the voting public is that the “hubris, the ego and the lack of focus on working people” frrom Conservative ministers had a direct impact, and “ruined the lives of people across this country”, he adds.

Harking back to the mini-budget crisis of 2022, Darren Jones says people across the country suffered from higher mortgage bills, as well as higher grocery bills.

Conservative MPs should observe “a period of silence while they learn the lessons”, he argues.

Speaking of 2022…Liz Truss has sent a legal letter to Keir Starmer demanding he stops making “false and defamatory” claims that she crashed the economy.

Labour MP Louise Jones tells MPs that many of her constituents (in North East Derbyshire) are “really struggling” with the cost of living crisis, which is why the government must rebuild the foundations of the economy.

Darren Jones agrees, saying that if you play fast and loose with the nation’s finances, you play fast and loose with the public’s finances too.

Liberal Democrat Paul Kohler suggests the opposition MPs have an “incredible brass neck” for expressing concerns about the UK’s debt situation.

Isn’t the solution to growth to re-engage with Europe?

Darren Jones say the UK needs to improve trading relationship with countries around the world – that’s why Rachel Reeves is going to China.

Reform MP Richard Tice has warned parliament that the UK is heading towards a financial crisis.

Tice points out that UK GDP fell in September and October (both by 0.1%), while sterling is “falling, almost collapsing”.

Confidence is falling and investors are fleeing, he warns, while the only things going up are “inflation, wasteful public spending, and the cost of debt”.

Tice says:

We are heading towards, be under no illusion, a financial crisis.

He asks Darren Jones to tell the chancellor to return from her ‘ridiculous’ trip to China, and cut daft spending and wasteful regulation to create growth.

Jones replies that he will not tell Reeves to come back from her trade trip to China.

Conservative MP Bernard Jenkins, argues that Darren Jones is making a significant announcement today – that austerity is effectively back.

Jenkins makes the point that if tax rises and borrowing increases are off the table, then the only lever left is spending cuts.

He says:

There is no way that the public finances can be remedied by another budget of wishful thinking, pretending that increased borrowing and spending will produce growth.

That has been proved as a false way to lead the economy, he argues.

Darren Jones says the government is not bringing back austerity – that was an ideological cuts to public finances and the size of the state, irrespective of what it meant for public services.

Chancellor Rachel Reeves announced the ‘opposite of austerity’ last autumn, the chief secretary to the Treasury insists, by making more money available for public services.

Harriett Baldwin MP accuses Rachel Reeves of having ‘fled to China’ rather than face MPs over the rise in public borrowing costs, because she realises her budget means she is “the arsonist”.

Baldwin says yesterday’s statement from the Treasury (which said the government has an iron grip on the public finances) was an “extraordinary emergency” effort to calm the markets.

Darren Jones says these “inflammatory” comments are rather surprising, and don’t reflect reality.

The trip to China has been in the diary for weeks, he points out.

And he rejects claims that the Treasury has intervened in the markets, saying yesterday’s statement was simply a response to questions from the media.

Jones says:

There has been no emergency statement or emergency intervention, these are make-believe words being propagated by members on the benches opposite….

There is no need for any emergency intervention, and there hasn’t been one.

[as reported earlier, the Daily Telegraph reported last night’s statement as the Treasury stepping in to halt market mayhem.

Technically, an intervention actually involves a government or central bank actually buying or selling an asset to move the markets, not simply issuing a press release].

Conservative MP John Glenn says the government must either cut spending, raise taxes, or borrow more to keep within the fiscal rules.

If the cost of borrowing is rising, the decision comes sooner – so when will the government say what it plans to do?

Darren Jones repeats that the fiscal rules are non-negotiable, and that public services must live within their means.

Labour MP Torsten Bell points out that the opposition are keen on spending increases, but oppose tax rises to pay for it.

Q: Isn’t one of the lessons of the developments recent days that we must pay for day-to-day spending through tax rises, however tough that is?

Chief secretary to the Treasury Darren Jones agrees that day-to-day bills need to be paid by day-to-day income.

Conservative MP Sir Edward Leigh tries to nail down how the government will keep within the fiscal rules.

Q: Will the minister give an absolute assurance there will be no more increases in tax or borrowing?

Darren Jones says he can absolutely assure Leigh that the spending review will be developed within the envelope laid out in the budget.

Liberal Democrat Treasury spokesman Clive Jones warns MPs that the Labour government is making some of the same mistakes as its predecessors.

He says Rachel Reeves has a very difficult job, having inherited an economy “on its knees due to Conservative mismanagement” (cue much groaning from some Tory MPs).

Jones cites the “terrible trade deal with Europe”, “soaring inflation”, “stagnant growth” and the Liz Truss mini-budget which hit mortgage holders across the country.

Q: Is protecting the NHS and healthcare also non-negotiable, as the government tries to balance the books?

Darren Jones says the NHS is one of the government’s “key commitments”.

He also suggests the opposition have a nerve groaning at Clive Jones’s comments – the public should be groaning at them, he argues.

Labour MP Meg Hillier asks what notice departments will get of further cuts they may need to make to meet the fiscal rules.

Darren Jones says the second phase of the spending review, to set budgets from 2026-27, is under way. The review will be concluded by June.

Chief secretary to the Treasury Darren Jones repeats that the fiscal rules are ‘non-negotiable”.

He doesn’t explicitly say whether that would mean tax rises or spending cuts, but does say that public services will have to ‘live within their means’.

He points out that the UK debt burden rose steadily since 2010, to pay for day-to-day spending, under the previous Conservative government.

Mel Stride adds that “regrettably”, the government could be on track to breach its fiscal rules.

Does the government stand by Rachel Reeves’s pledge not to raise taxes further, and does this mean that government spending will be cut if the OBR concludes that the fiscal headroom has ‘evaporated’, he asks.

Shadow chancellor Mel Stride responds, demanding to know where Rachel Reeves is to answer today’s question.

Stride blames the chancellor’s decisions for pushing long-term borrowing costs up to a 27-year high.

The economy is now flatlining, he says, as business confidence has “simply evaporated”.

He tells MPs:

Higher debt and lower growth are understandably now causing real concerns among the public, amongst businesses, and in the markets.

Stride brushes aside Darren Jones’s argument that international geopolitical factors are influencing the bond market, pointing out that the UK’s borrowing premium over German bonds recently hit its highest level since 1990.