British Fiscal Policy Under Pressure: Starmer Supports Reeves Despite Rising Credit Costs

The latest turbulence in the British financial market has made significant waves. The interest rates for British government bonds recently reached their highest level since the financial crisis of 2008, which has considerably increased the pressure on Chancellor of the Exchequer Rachel Reeves. Prime Minister Keir Starmer has now reaffirmed his full support for her, assuring that the government will adhere to its fiscal rules. Although adhering to these rules is becoming increasingly difficult due to rising borrowing costs, Reeves receives backing from the highest circles. At a conference in London, Starmer praised Reeves' work to date and emphasized the importance of clearly defined fiscal regulations for the stability of the British economy. When asked if he was willing to consider spending cuts to ensure compliance with the rules, he responded evasively, though with emphasis on the government’s determination in financial matters. However, the rise in interest rates has largely absorbed the gap of 9.9 billion pounds that Reeves had against her main fiscal target in the budget in October. A breach of this rule could loom when the Office for Budget Responsibility presents its semiannual economic report in March. For this reason, there is already speculation about possible spending cuts. Meanwhile, Prime Minister Starmer expressed confidence that the use of artificial intelligence will boost growth and improve the country's economic situation. Growth is the government's top priority, Starmer emphasized. Apart from the economic challenges, Chief Secretary Pat McFadden defended Reeves' decision to travel to China despite domestic political tensions. For McFadden, there is no question that Reeves is the right person for the role of Chancellor of the Exchequer, and he firmly believes that she will continue to fulfill her role.