Reeves says market volatility global and tells Conservatives to 'get real'

Rachel Reeves has told the Conservatives to "get real" as she blamed global economic volatility for the recent increase in UK borrowing rates which has triggered calls for her resignation and left her contemplating further spending cuts.

- Kiran Stacey, Eleni Courea

The chancellor appeared in front of MPs yesterday for the first time since travelling to China and after several days of bond market turmoil which left the government's borrowing rates at their highest levels in decades.

Reeves is facing one of the most difficult periods in her six months in office, with investors dumping UK bonds and the pound amid concerns about low growth in Britain and abroad. The government sold £1bn worth of new bonds yesterday on the most expensive terms since 2004.

Reeves told the Commons that recent moves in UK bond markets tracked those in other countries.

Addressing demands from her Conservative counterpart, Mel Stride, to step down, she said: "The shadow chancellor is simply not serious."

Experts said the recent moves in UK borrowing costs have all but wiped out the headroom Reeves had against her fiscal targets, leaving her looking for further tax rises or spending cuts to make up the shortfall.

Treasury sources said that if confronted with that choice, Reeves would choose another round of cuts, even with unprotected departments already being asked to make average reductions of 1.3% every year after 2026.