The Treasury is on the defensive today amid concern over a rise in the cost of government borrowing. But Chancellor Rachel Reeves isn’t on hand to answer questions about the situation, as she jets to China for a trip to boost economic ties.
Thursday 9 January 2025 12:01, UK
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Foreign Secretary David Lammy opens his keynote speech by talking about the past, and Nye Bevan’s role in Attlee’s post-war Labour government.
“He was a minister of action who saw that what matters is not just what Britain says, but what it does,” Mr Lammy says.
“What matters is not just what Britain wants, but what it builds. And what [makes it matter] is having a strategy.”
The UK must “face the future once again”, and deliver “secure borders”, he argues.
The foreign secretary sharply criticises how previous Tory governments handled the economy, saying they retreated from the world stage and allowed migration to get “out of control”.
Turning to the present day, Mr Lammy declares that “the post-Cold War peace is well and truly over”, with conflicts around the world, famine “from Gaza to Sudan”, and “the most refugees and displaced people on record”.
The world “will not” get back to normal, the foreign secretary says, and asserts that “Europe’s future security is on a knife-edge”.
That means Labour has changed the UK’s foreign policy to work more closely with European neighbours on defence, strengthening our friendship with both US political parties and “joining them to defend Israel from Iranian attacks”, and progressing the defence partnership with Australia as well.
In terms of Russia, the new foreign policy also involves “not allowing Putin’s mafia state to act with impunity” and standing with Ukraine.
He also argues that the UK need “pragmatic engagement” in areas where we can cooperate, but also “very robust dialogue and challenge where there are clear threats”.
The foreign secretary says the UK and allies must return to long-term thinking to secure “strategic stability” in the chaotic world.
He declares that “Donald Trump and JD Vance are simply right when they say that Europe needs to do more to defend its own continent”.
And he calls for “closer partnerships with Global South”, saying “the world is larger than the North Atlantic and the Mediterranean”.
David Lammy is giving a speech on people smuggling and the government’s attempts to tackle it.
You can watch live in the stream below or at the top of this page.
In response to shadow chancellor Mel Stride (see previous post), Treasury minister Darren Jones defends the government’s handling of the economy and reiterates that their fiscal rules are “non-negotiable”.
He then goes on the attack, saying previous Tory governments had to borrow money for day-to-day spending “because of an absolute failure to get growth into the economy”.
Labour are “going to deal with it”, he insists, and says public services will have to “live within their means”.
‘These are make-believe words’
Stride asked the minister about the highly unusual “emergency statement” issued yesterday amid the rising cost of government borrowing.
But Mr Jones dismissed it out of hand, telling the House: “There was no emergency statement or emergency intervention. These are make-believe words being propagated by [Tory MPs].
“The Treasury responded to requests from journalists about [fiscal] headroom in the normal way.
“There is no need for any emergency intervention and there hasn’t been one,” he adds.
Shadow chancellor Mel Stride, who tabled the urgent question about the UK’s rising borrowing costs, rises to respond to Treasury minister Darren Jones’s defence of Labour’s handling of the economy (see previous post).
The first question he asks is: “Where is the chancellor?”
He tells the House it is “a bitter regret that at this difficult time with these serious issues that she herself is nowhere to be seen”.
Rachel Reeves is en route to Beijing.
Mr Stride goes on to say that in the last 48 hours, borrowing costs have reached a 27-year-high, and he says “it is the chancellor’s decisions that have led us here”.
He says the economy is now “flatlining” despite Labour’s promises at the general election, with “higher debt and lower growth”, and surveys show business confidence is “evaporating”.
Will chancellor make ’emergency intervention’?
He asks the Treasury minister if the chancellor stands by her pledge not reduce taxes again, and if public spending cuts could be needed if the independent Office for Budget Responsibility finds that the “fiscal headroom has evaporated”.
The shadow chancellor also raises media reports that the chancellor will make an “emergency intervention to soothe markets” in a speech outside the House, and asks for confirmation that any such statement will be made in the Commons first.
Shadow chancellor Mel Stride has tabled an urgent question asking the chancellor for a statement “on the growing pressure of borrowing costs on the public finances”.
Rachel Reeves’s deputy, chief secretary to the Treasury Darren Jones, is answering in her place, and he tells the House: “Financial markets are always evolving, as the shadow chancellor knows.
“So it is a longstanding convention that the government does not comment on specific financial market movements, and I will not be breaking that convention today.”
On the rising cost of UK borrowing, he says gilt yields “are determined by a wide range of international and domestic factors”, and adds that it is “normal” for the prices to “vary when there are wider movements in global financial markets”.
He insists that “UK gilt markets continue to function in an orderly way”, and that “underlying demand for the UK’s debt remain strong”.
Fiscal rules are ‘non-negotiable’
In terms of what these rising borrowing costs mean for the chancellor’s fiscal headroom (what money she has available to spend), Mr Jones says only the independent Office for Budget Responsibility can say what the effect will be, and they will next report in March.
“There should be no doubt of the government’s commitment to economic stability and sound public finances – this is why meeting the fiscal rules is non-negotiable,” the minister says.
Mr Jones then goes on the attack against the Tories, claiming the Tories “crashed the economy with unfunded tax cuts, unrealistic public spending cuts, a clear disregard for the consequences for family finances”.
There is presumably a reference to ex-PM Liz Truss’s mini-budget. She argued in a “cease and desist” letter to Sir Keir Starmer today that claiming she “crashed the economy” is defamatory.
As we have been reporting on Sky News, borrowing costs for the UK government have risen significantly of late – higher than they were following the Truss mini-budget in autumn 2022.
As a result, shadow chancellor Mel Stride tabled an urgent question in the House of Commons on the topic.
He is asking Chancellor Rachel Reeves for a statement “on the growing pressure of borrowing costs on the public finances”.
However, the chancellor is not answering the question – she has sent her deputy, chief secretary to the Treasury Darren Jones, in her place.
The statement is under way now in the chamber – watch live on Sky News, in the stream above, at the link below, and follow updates here in the Politics Hub.
Watch Sky News live for free on Sky channel 501, Virgin channel 602, Freeview channel 233, on the Sky News website and app or on YouTube.
The environment secretary has been speaking at the Oxford Farming Conference this morning, and he addressed the changes to inheritance tax that have led to vast protests from farmers – including one outside the venue he was speaking in.
Steve Reed said the government wants to “make it easier for all farmers to meet the challenges of the transition and run successful businesses”, but says he is hearing from them that “the turmoil of recent years has made farming incredibly tough”.
“I recognise the anger when farmers came to protest in Westminster last year, but it wasn’t just about tax,” he said, pointing to farmers battling input costs, tight margins, unfair supply chains, a shortage of skilled workers, growing concerns about extreme weather, and issues with access to European markets and with post-Brexit trade deals.
And he repeated Labour’s claims of a £22bn black hole in the nation’s finances, which he said “meant we had to take immediate tough decisions across the economy to balance the books”.
“We were shocked by the size of the financial black hole we were left to fill, and I’m sorry that some of the action we had to take shocked you in turn, but stable finances are the foundation of the economic growth needed,” he said.
Mr Reed went on to acknowledge that the changes were “very unwelcome”.
“It wasn’t something we intended or wanted to do before we saw the state of the public finances, and of course, I regret that, but we tried to make it a little easier,” he told farmers.
Lawyers for former prime minister Liz Truss have sent a “cease and desist” letter to the prime minister, stating his claim she “crashed the economy” with her mini-budget in 2022 is defamatory.
Her legal team says statements he made throughout the general election that she was responsible for the economic turmoil in autumn 2022 “have caused and will likely continue to cause serious harm to her reputation”.
The 49-day PM’s lawyers say in their six-page letter that claiming she “crashed the economy” is “false and misleading”.
“Their publication is not only extremely damaging but also grossly defamatory and indefensible,” they wrote to Sir Keir Starmer.
‘It was the Bank’s fault’
They say they “disagree that any market movement during the relevant period referred to in your defamatory statements can be classified as a ‘crash of the economy’ in any proper sense of the meaning of those words”.
The hike in interest rates, the ex-PM’s lawyers argue, were as a result of the Bank of England’s “poor handling of the LDI crisis, and its regulatory failures”.
They pointed to a report from a fellow at the free-market thinktank, the Institute of Economic Affairs, who said it is “clear that there was no economic crash in or following the period of the Truss Administration”, and noted that “economic output did not fall”, while there was no rise in unemployment.
Ms Truss’s legal team conclude the letter to the PM by saying: “Our client requests that you immediately cease and desist from repeating the defamatory statements at any point, from causing them to be repeated or from otherwise re-publishing the defamatory statements or any part of them”.
Downing Street has been contacted for comment.
As we have been reporting on Sky News, borrowing costs for the UK government have risen significantly of late – higher than they were following the Truss mini-budget in autumn 2022.
As a result, the Speaker has granted an urgent question in the House of Commons on the topic.
Shadow chancellor Mel Stride has tabled the question to Chancellor Rachel Reeves. He is asking for a statement “on the growing pressure of borrowing costs on the public finances”.
It is unclear if the chancellor herself will answer the question, or if she will send a junior minister instead.
The statement will take place in the House of Commons from around 10.30am – we’ll have live coverage here in the Politics Hub and across Sky News.
By Sky News Data and Forensics Unit
The grooming gangs scandal has been in the public eye for more than a decade, with multiple public enquiries and a string of prosecutions.
All of that went apparently unnoticed by the world’s richest man, until a few days ago.
Sky News analysis suggests just a handful of right-wing accounts on X prompted and developed Elon Musk’s interest in the topic, which has ignited debate online and offline.
This shows the volume of discussion on the subject on X before – and after – Musk’s involvement, looking at the keywords of grooming gangs and rape gangs.
The impact of the far right
There have been at least 40 million engagements since he took interest, according to Talkwalker, a social media monitoring tool.
Condemnation of rape and grooming gangs isn’t far-right in itself: the entire British public shares exactly the same position.
But there’s evidence that Musk’s introduction to the topic is a result of right-wing and far-right accounts on X.
This is Musk’s first post on the subject – on New Year’s Eve. He’s replying to an account he follows – and there are less than 1,000 of those – which focuses on immigration and crime statistics.
Tommy Robinson among most influential
Sky News has analysed more than 2,000 of Musk’s posts over this recent period to understand which are the most influential accounts, in terms of whom he replies to and who he reposts.
Right-wing commentators and news aggregators are prominent, as is far-right figurehead Tommy Robinson.
Peter Sweden, the account Musk has interacted with the most, has previously apologised for posts denying the Holocaust.
Ian Miles Cheong, a commentator based in Malaysia, and Visegrad 24, set up by South-African Polish advertiser Stefan Tompson, are influential right-wing news accounts with millions of followers between them.
And it’s taking up a lot of Musk’s time and efforts.
For a man with many interests, from space rockets to population birth rates, our research found that around a third of his recent output on X has been largely focused on grooming gangs.
Musk’s new favourite UK politician?
That has involved interactions with specific British politicians, notably his targeting of the government’s safeguarding minister Jess Phillips.
But it even includes Ed Davey, the leader of the Liberal Democrats, whom Musk called a “cretin”.
Most interacted with by Musk, though, and also on that list above, is Rupert Lowe, the Reform UK MP.
After saying that Reform’s leader Nigel Farage didn’t “have what it takes”, Musk seems to think Lowe does.
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