10m
22 Jan 2025

UK finances now on ‘firm footing’, says Chancellor

Presenter

We spoke to Rachel Reeves, and began by asking if she agreed with some experts that a trade war with the US would be disastrous.

Rachel Reeves: I think that’s rather jumping the gun and I’m not going to comment on hypotheticals. But there is £300 billion worth of trade between the UK and the US. A million Brits work for American firms. A million Americans work for British firms. That is testament to the special and strong relationship between our two countries that I know will continue under President Trump.

Cathy Newman: But if Trump did impose tariffs on the UK, we would be forced to retaliate, wouldn’t we?

Rachel Reeves: I don’t think tariffs are good for anyone and I’ll be making that case strongly. But last time President Trump was in the Oval Office, trade between the UK and the US increased and I have no doubt that that can happen again.

Cathy Newman: So you’ve never been a Brexiteer, obviously, but is there a potential Brexit benefit that if there was a trade war or even a skirmish, the UK could be slightly nimbler outside the EU?

Rachel Reeves: The EU has a trade surplus with the US, that’s not the case for the UK. President Trump is concerned about countries that are running surpluses and that’s not the British case.

Cathy Newman: So better off out?

Rachel Reeves: No, I mean I’m not going to revisit. We’ve left the European Union almost nine years ago now since that vote, we’re not going to start revisiting that. But there are a number of areas where we can be nimble as a country. We have been, for example, on the regulation of AI and the way that we are implementing global standards on financial services. This is not an either or, it’s not trade with the US or trade with Europe, but we need to trade with countries around the world. We’re an open economy, open for business.

Cathy Newman: You need a trade deal, a bilateral trade deal with the US. How soon do you hope you can get that with the new administration?

Rachel Reeves: We’ll look to do deals with countries around the world. At the moment, we’re in negotiations with the Gulf countries on a trade deal which could be advantageous for investment and trade in the UK. We’ll continue to look for deals right across the globe.

Cathy Newman: Businesses here have been telling me, I’m sure they’ve been telling you, that there’s been a chilling effect from the budget of tax rises. Figures yesterday suggest that employers paused hiring after the national insurance rise, for example. Can you tell businesses ‘read my lips, no more tax rises’?

Rachel Reeves: I’m not going to write five years’ worth of budgets in the first six months in office. But what the budget in October did was draw a line under the economic and financial mismanagement of the Conservative government. I’ve now put our public finances in order, so never again will I have to do a budget like I did in October. But public finances are now on a firm footing.

Cathy Newman: You were slightly more explicit about the prospect of tax rises immediately after that budget. December, you said, ‘I’m really clear. I’m not coming back with more borrowing on more taxes’. You can’t say the same now, can you?

Rachel Reeves: Our fiscal rules are non-negotiable. Our fiscal rules to get debt down as a share of GDP and balance day to day spending with tax receipts. Those fiscal rules are so important because that is what provides the stability in our economy.

Cathy Newman: It just hasn’t been good news for you at all in the last few weeks, has it? Even today, government borrowing in December was the highest for four years.

Rachel Reeves: You can always point to two data points that are less good. But let me point to a couple that are more positive. This week, PWC published a report that said global CEOs see Britain as the second best place in the world to invest apart from the United States. That’s the first time in 28 years that we’ve been at that point in the league table.

Cathy Newman: You’re here with a clear push for growth. Reportedly, you’re backing airport expansion as part of that mission, including a third runway at Heathrow. So I just wonder what you say to Ed Miliband, who’s been opposed to this, vehemently opposed, amongst other cabinet members in the past?

Rachel Reeves: This government have already signed off expansion at City Airport and Stansted Airport. I’m not going to comment on speculation or decisions to come. But growth is the number one priority of this government. We want to welcome international investments and trade from around the world.

Cathy Newman: Keir Starmer used to say that he preferred Davos to Westminster. Given all the criticism you’ve had at home, do you share that view now you’re here?

Rachel Reeves: Being in Davos is an important part of my job as chancellor. I want to bring good jobs and growth to Britain to make working people better off. And that’s exactly what I’m doing in Davos this week.

Cathy Newman: You’ve had quite a lot of unkind criticism at home, haven’t you? Some of your critics call you ‘Rachel from accounts’. Do you see it as a sort of whiff of sexism there?

Rachel Reeves: I’ll let other people make the judgement. I’m just going to get on with the job.