Amid growing economic turbulence, Downing Street has confirmed that Chancellor Rachel Reeves will remain in her post “for the whole of this Parliament” despite mounting criticism of her handling of the UK’s economic challenges. The Pound fell further against the Dollar on Monday, while long-term Government borrowing costs surged to new heights, sparking concerns over mortgage rates and public debt.
British 30-year government bond yields climbed to a 27-year high, reaching 5.472%—a level last seen in 1998—before slightly retreating to a rise of roughly 4 basis points. This sharp increase reflects a continuation of last week’s gilt market sell-off, driven by concerns over the Government’s plans to issue more debt amid a slowing economy and inflationary pressures from abroad.
By 9 a.m., the Pound was trading at $1.2141, down from $1.2212 at the previous close. The Euro also gained against the Pound, moving to 0.8417 compared to 0.8383 at the previous close.
Economic woes and political reassurances
The deteriorating economic outlook has fuelled fears of rising mortgage rates, with experts warning that some lenders are already “edging up” their rates. Despite this, Labour leader Sir Keir Starmer expressed full confidence in Rachel Reeves, even as she faced criticism for her recent trip to China. Starmer confirmed she would remain Chancellor until the next general election, doubling down on her role despite challenges.
In a statement, Starmer said, “Rachel Reeves has my full confidence. She has been working tirelessly to address the economic challenges facing the UK and will continue to do so throughout this Parliament.”
Prime Minister Rishi Sunak’s official spokesman reinforced this message, stating: “The Prime Minister has full confidence in the Chancellor and will be working with her in the role for the duration of this Parliament.”
Internal and external criticism
While the Government rallied behind Reeves, criticism emerged from both opposition and internal sources. Shadow Chancellor Mel Stride described her China trip as “tone deaf,” arguing that Reeves should have stayed in the UK to reassure financial markets during a period of volatility.
Speaking on Sky News, Stride said, “The markets move quickly, and confidence is key for any Chancellor. To be absent and halfway around the world during such a critical time is a serious misstep.”
Stride further warned that rising bond yields could add £12 billion annually to the cost of servicing the national debt, with real implications for British households and public spending.
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Defence of the chancellor
Cabinet Office Minister Pat McFadden, a close ally of Starmer, dismissed speculation about Reeves’ future, insisting she remains the right person for the job. Speaking on LBC Radio, McFadden said, “Rachel Reeves is the Chancellor for a good reason. She’s highly qualified and has the full support of the Cabinet.”
McFadden also defended Reeves’ trip to China, describing it as essential for fostering trade relations. “China is a significant trading partner. It was right for her to go and promote British business. Cancelling that trip would have been a bad mistake.”
Reeves herself has stood by her fiscal policies, calling her rules and recent Budget “non-negotiable” despite criticism of a £25 billion National Insurance hike for employers. Critics argue this could stifle recruitment at a time when businesses are already under pressure.
Economic outlook
The Pound’s continued fall and rising borrowing costs come at a delicate time for the UK economy. Pension schemes, however, appear to be in a “robust position” to withstand the pressure from soaring borrowing costs, experts say. Nonetheless, the broader impact on consumers and businesses is raising questions about the Government’s ability to manage these challenges effectively.
While some critics see Reeves’ policies as exacerbating the economic turmoil, her supporters within the Cabinet argue that the measures, though controversial, are necessary to address the structural challenges facing the UK. With Starmer and Downing Street’s full support, Reeves now faces the daunting task of steering the economy through this turbulent period while maintaining public and market confidence.
