It is “absolutely right” that Chancellor Rachel Reeves’ trip to China goes ahead as planned, a cabinet colleague has said.
Opposition parties had called for Reeves to cancel the three-day visit, aimed to boost trade and economic ties, after the pound fell to its lowest level in over a year, while UK borrowing costs hit their highest for 16 years.
But Culture Secretary Lisa Nandy said the chancellor should take seriously the UK’s relationship with China, the world’s second largest economy. Nandy said the rise in borrowing costs was “a global trend that we’ve seen affecting economies all over the world”.
“We are confident that we’re taking both the short-term action to stabilise the economy but also the long-term action that is necessary to get the economy growing again,” she told the BBC.
Higher government borrowing costs have led to fears that further tax rises or spending cuts could be on the horizon as the government tries to meet its self-imposed rule not to borrow to fund day-to-day spending.
Lower-than-expected spending on public services could affect things like health, education and welfare.
Government borrowing costs, which have been rising in recent months, climbed again on Friday.
The pound, which fell to its lowest level in more than a year on Thursday, also dipped at the market open.
Analysts say it is unusual for those two things to happen together but suggest wider concerns about the strength of the UK economy had driven the pound lower.
On Thursday, the Treasury ruled out any emergency intervention in the markets, saying they continued to “function in an orderly way”.
Globally, there has been a rise in the cost of government borrowing in recent months sparked by investor concerns that US President-elect Donald Trump’s plans to impose new tariffs on imports from Canada, Mexico and China would push up inflation.
– BBC
