Rachel Reeves will have to raise taxes or make emergency spending cuts, experts warn

THERE is a “high chance” Rachel Reeves will have to raise taxes or make emergency spending cuts, experts said as she touched down in China yesterday.

Economists at Barclays said surging borrowing costs meant her room for manoeuvre had gone.

Its chief economist, Jack Meaning, said that, unless costs fell soon, “there is a high chance that she is forced to make fiscal adjustments”.

It came as the Chancellor, who met finance minister Lan Fo’an yesterday, was accused of deserting a Britain in turmoil.

One Cabinet colleague said the situation was “make or break” for Labour while another said Ms Reeves had “lost the plot”.

Shadow Chancellor Mel Stride added: “We are witnessing an economic mess of Rachel Reeves’ own making, with the impacts of her disastrous Budget continuing to bite.

"Yet astonishingly she made the choice to get on a jet rather than stay and try to get a grip.

“The Chancellor should turn right back around, and return to the UK urgently.”

Former Tory Leader Sir Iain Duncan Smith blasted: “The trip is pointless – as the disastrous ‘Golden Era’ showed, the murderous, brutal, law-breaking, communist regime in China will not deliver the growth the Labour government craves.

“Instead, she should stay home and try to sort out the awful mess her Budget has created.”

Gilt yields - the interest demanded by investors on government bonds - rose fractionally higher again yesterday.

Traders now reckon just one interest rate cut by the Bank of England can be fully priced in this year with mortgage rates already creeping higher.

High street lenders use government bonds to price their mortgages.
Matt Smith at Rightmove said: “The short term impact is that mortgage rates are likely to rise, as the cost of borrowing increases impacts lenders.”