Pound drops and UK bonds suffer big selloff after finance minister cries in parliament

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20 hours ago

British prime minister Keir Starmer's office rushed to give finance minister Rachel Reeves his full backing on Wednesday after she appeared in tears in parliament following a series of U-turns on welfare reforms that blew a hole in her budget plans.
Reeves looked exhausted and appeared to brush away tears during the half-hour session of prime minister's questions in the House of Commons. Her spokesperson said it was a personal matter.
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British borrowing costs rose and the pound fell as the weekly question-and-answer session unfolded on TV, with market analysts saying the moves reflected fears that Reeves would be replaced, throwing the government into further turmoil.
Asked about Reeves, a Treasury spokesperson said: "It's a personal matter, which – as you would expect – we are not going to get into."
Starmer's press secretary told reporters: "The chancellor is going nowhere, she has the prime minister's full backing."
The pressure on Reeves comes after the British government managed to pass its welfare reform bill, but only after it removed measures that would have led to savings in the long run.
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Reeves has repeatedly emphasised her commitment to self-imposed fiscal rules, limiting the amount Britain will borrow to try to build the confidence of investors.
But that ambition collided with Labour members of parliament who were opposed to the scale of the cuts to welfare, and who said Reeves was being cruel in pushing for billions of pounds of savings from some of the most vulnerable people in society.
Opposition politicians and economists said the decision to sharply scale back the welfare reforms meant the government would have to raise taxes or cut spending elsewhere to balance the public finances in the annual budget later this year.
Looking miserable
One Labour member of parliament, who asked not to be named, said Reeves was upset after an argument with the House of Commons speaker Lindsay Hoyle. A spokesperson for Hoyle declined to comment.
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The opposition Conservative Party leader Kemi Badenoch singled out Reeves during the weekly set-piece parliamentary session, in which lawmakers put questions to the prime minister in often-raucous exchanges, saying: "She's pointing at me, she looks absolutely miserable."
Reeves animatedly gestured back.
Badenoch said: "She is a human shield for his incompetence. In January, he said that she would be in post until the next election. Will she really?"
Starmer then responded that Badenoch would not be in her job by then, but did not explicitly back Reeves.
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The appearance of Reeves in tears put British government bonds on track for their biggest daily selloff since October 10th, 2022, when financial markets were still reeling from former prime minister Liz Truss's decision to announce big, unfunded tax cuts. The pound fell almost 1 per cent on Wednesday.
Starmer's press secretary later said the prime minister had expressed his confidence in Reeves many times and did not need to repeat it every time a political opponent speculated on her position.
The Treasury spokesperson said Reeves would be working out of Downing Street on Wednesday afternoon.
Asked if Reeves had offered her resignation, Starmer's press secretary said: "no".