United Kingdom in terrible straits after the tears of the Minister of Finance on the markets
The British chancellor of the chessboard Rachel Reeves and the British defense secretary John Healey visit Wellington Barracks, in central London, March 26, 2025.
Stefan Rousseau | AFP | Getty images
All eyes are now on the Labor Party in power of the United Kingdom for any sign of additional political fractures which could draw the economic stability of Great Britain, after the extraordinary view of the country’s Minister of Finance that cries in Parliament on Wednesday.
British bond yields increased and the pound sank against the dollar and the euro while tears fell from the face of Chancellor Rachel Reeves, because an apparently unconscious Prime Minister Keir Starmer did not support her when he was asked about his position during a heated parliamentary debate.
The market movements were sudden because the traders hypothesized that Reeves could be about to lose their job or potentially resign, taking its strict “budgetary rules” to spend and borrow with it.
“There are a lot of eyes on the United Kingdom,” Simon Pitaway, principal economist at the Resolution Foundation told CNBC, while the drama took place on Wednesday.
“Regarding the [next] Fall budget, whoever the Chancellor, they will have really difficult decisions to make. And I think that in the case of us, to stick to existing budgetary rules is really crucial, it is a decision that would signal credibility and trust in the market “at a time when the country is under control, he told Ritika Gupta de CNBC.
“Taking these budgetary rules, and according to government priorities, a combination of higher taxes and lower expenditure, towards the end of the forecast period could be the way to follow,” said Pittaway.
The government has blurred calm the situation in the middle of the market’s spread, with a spokesperson attributing the distress of reeves to a “personal affair” without commenting more. The Prime Minister then told the BBC that he and the chancellor were “in locking” and that he had fully supported him.
The comments seemed to appease the markets, with London FTSE 100 In addition to almost 0.5% in anticipated projects Thursday morning, the British book also higher against the euro and the dollar. The yield on the 10-year reference bonds of the United Kingdom, known as the nicknames, was down 6 base points.
‘Say straits’
Reeves underwent sustained pressure since last fall budget, during which it unveiled a massive increase in public spending which would be largely funded by a sharp tax increase in British companies and employers.
She also declared that she would implement two budgetary rules to obtain the heap of debt from the United Kingdom and borrow under control: first, daily public spending will be funded by tax revenue and not by loan, and, secondly, that public debt will fall as an economic share by 2029-30.
British Prime Minister Keir Starmer (L) and the Chancellor of the chessboard Rachel Reeves (R) drink tea during a visit to local businesses on September 26, 2021.
Justin Tallis | AFP | Getty images
The rules have given the treasury of little tax reeves “the room of room”, and the small room for maneuver it has been made by the government bringing the reductions in social protection spending in recent months.
After another tour of the government this week, this time on disability benefits, Reeves must now find savings elsewhere – Tricky, when she has just announced massive public spending plans – break her borrowing rules or go against campaign promises and an increase in workers’ taxes later this year.
At a wider level, following the last rise on well-being, the Labor Party leadership will now have to strive by a rebellious group of rear-balance legislators who will feel embarrassment of the government to other potentially controversial reforms and discounts of expenses.
“The nature of what happened in the last 48 hours, the government’s well-being bill being torn apart, this means that the government’s political and economic strategy is in an absolute strait at the moment,” said Max Wilson, director of public affairs at Whitehouse Communications on Thursday.
The government is found with “such a small room for maneuver” because of its previous political decisions and concessions to the backbanchers, Wilson said.
“Financially, economicly, there is very little that they can do, and Rachel Reeves has such difficult work in his hands now, finding additional money without using other actions that will upset the markets, including borrowing more or tax increases, therefore, really, I think that the government left in an absolute link here,” he noted.
