Cabinet minister defends Rachel Reeves trip to China during economic crisis

The value of the pound fell to its lowest level in over a year while UK borrowing costs jumped to their highest since the financial crisis

A Cabinet Minister has defended Rachel Reeves for going ahead with a visit to China instead of staying at home to tackle fears of an economic crisis.

Culture Secretary Lisa Nandy said the Chancellor was ‘absolutely right’ to ignore Tory calls to abandon the trip. She insisted Ms Reeves economic strategy was ‘on track.’

However, Ms Nandy conceded that the Government’s economic plans were not ‘all going swimmingly.’ Her comments came amid claims that Ms Reeves, the most powerful member of Keir Starmer’s team, is facing criticism from members of her own Cabinet.

Ms Nandy said she was confident Ms Reeves was on course to “get the economy growing again”.

She continued: “That is why it is absolutely right and proper that the Chancellor is taking seriously our relationship with the world’s second largest economy and is in China this weekend.

“We are confident we are on track to be the fastest growing economy in Europe.”

“I don’t think we should be worried”, the culture secretary said (PA Wire)

When Ms Nandy was challenged by the BBC that she was ‘in denial’ at the scale of the economic problems, she replied: “I’m not for a moment saying it is all going swimmingly.”

The Tories had called on Ms Reeves to abandon the China trip to deal with soaring borrowing costs and a dramatic fall in Sterling.

Some critics have compared the situation to the economic crisis in 1976 when Labour Chancellor Denis Healey was forced to cancel a trip to the US at the last minute to deal with an economic crisis in the UK.

People “shouldn’t be worried” about the state of the economy, the culture secretary has claimed, despite borrowing costs reaching their highest level since the 2008 financial crash.

While she said the current state of Britain’s finances is “obviously something we take very seriously”, she brushed off concern saying “these are global trends that have affected many countries”.

On Thursday, the value of the pound fell to its lowest level in over a year while UK borrowing costs jumped to their highest since the financial crisis.

Asked whether the public should be worried, Ms Nandy told Sky News: “I don’t think we should be worried. It’s obviously something we take very seriously. But these are global trends that have affected many countries, most notably the United States as well as the UK.

“We are still on track to be the fastest growing economy, according to the OECD in Europe”.

Rachel Reeves is to visit China this weekend (PA) (PA Wire)

Economists have warned that Ms Reeves could be forced into further tax hikes or cuts to spending plans to meet UK fiscal rules due to a potential rise in the government’s debt interest bill - the amount of money the government pays to service its debt.

The UK’s fiscal rules, which Ms Nandy stressed are non-negotiable, aim to ensure that the government’s day-to-day spending is met by its revenues, and that public sector debt falls as a share of the economy.

“We’re not going to borrow for day-to-day spending”, the culture secretary said. “We’re going to continue with the plan for change, which is to get people off waiting lists, get them back into work, get the planning reforms that we need to build homes and get the economy growing and stabilize the economy so that we protect working people from the worst excesses that we’ve seen over recent years.

“And we’re confident that we’re still on track to do so”, she said.

But the Institute for Fiscal Studies (IFS) warned the government’s “razor-thin margin” to meet its rules could be easily eroded if interest rates stay higher, as the rise in the cost of servicing government debts could cut into Labour’s expected financial headroom in a potentially worrying sign of how investors see fiscal sustainability in the UK.

It comes as the chancellor seeks advice from other cabinet members on options to boost growth, amid escalating market turmoil, with Ms Nandy saying the government is “always looking for new levers to pull”.

Sources told The Times that Ms Reeves is planning to make a significant speech on growth this month and has asked ministers to generate concrete measures to improve economic activity, as well as instructing them to “cease anti-growth measures”.

Asked whether she has been approached by the chancellor for ideas to boost growth, the culture secretary said: “Always. I’ve known the chancellor for 15 years now, and she has been relentless in her pursuit of growth, both in opposition and in government.

“She and I have been working very closely together on plans around the creative industries. The creative industries, like film, TV, video games, are amongst our fastest growing industries in the country. Huge amounts of investment pouring in from overseas into those industries.

“We’re creating good jobs all over the country, in Sunderland and the Welsh Valleys, as well as London and the South East, Birmingham, Dundee and elsewhere.”

She added: “We are always looking for new levers to pull, new ways to grow the economy, but there’s one aim in mind, and that is to improve the lives and living standards for people in every part of the UK.”