Reeves back at Cabinet meeting amid market turmoil
Concerns have swirled that the Government is in danger of failing to meet its own fiscal rules and will need to take action to remain on track.
Rachel Reeves is expected at Downing Street for a Cabinet meeting on Tuesday as she continues to face pressure amid market turmoil.
It comes after Sir Keir Starmer appeared to waver in his support for the Chancellor when he said he had confidence in her but refused to say she would keep her role until the next general election.
Downing Street clarified hours later that Ms Reeves would stay in post for “the whole of this Parliament”.
As the Chancellor returned from her trip to China, concerns have swirled that the Government is in danger of failing to meet its own fiscal rules and will need to take action to remain on track.
The pound fell to a fresh 14-month low on Monday, at 1.21 dollars. It regained some ground later in trading but still finished 0.3% lower at 1.216 when London’s markets closed.
UK government bonds – also known as gilts – saw 10-year yields rise to fresh highs not seen since 2008. They were five basis points higher at 4.89% at the end of trading.
Longer-term borrowing costs were also higher, with the yield on 30-year gilts up three basis points at 5.45%, after striking its highest level for 27 years earlier on Monday.
Yields are a key indicator of market confidence, moving inversely to bond prices.
They rise when investors are less willing to own the debt, meaning they will pay a lower price for the bonds.
Amid the turbulence, Sir Keir has brought in a former Treasury insider to front the No 10 policy unit.
Civil servant Olaf Henricson-Bell was head of communications to three Tory chancellors.
Sir Keir stressed that the Government would meet its “fiscal rules” – including requiring day-to-day spending to be met from revenues rather than further borrowing.
But meeting the rising cost of government borrowing eats into the funding available, which could force Ms Reeves to act to either reduce spending or raise taxes to comply with her rules when the Budget watchdog gives its updated forecast in March.
The Prime Minister said the Government would be “ruthless” in its approach to public spending, while Downing Street said that “nothing is off the table” as departments consider where to cut spending.
Meanwhile a voting intention poll carried out at the weekend put Reform UK just one percentage point behind Labour.
The YouGov survey for Sky News put Labour at 26%, Reform UK at 25% and the Conservatives at 22%.
