The public should not be “worried” about the cost of government borrowing going up, a cabinet minister has said.
Lisa Nandy said the current situation in the financial markets – which has seen the pound fall to to its lowest level in over a year – was something the government took “very seriously”.
But she suggested the situation was influenced by “global trends that have affected many countries” and that the UK was not an outlier.
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Asked whether people should be concerned about the fact that UK borrowing costs have surged to the highest in 16 years, Ms Nandy told Anna Jones on Sky News Breakfast: “I don’t think we should be worried.
“It’s obviously something we take very seriously, but these are global trends that have affected many countries, most notably the United States, as well as the UK.
“We are still on track to be the fastest growing economy, according to the OECD [Organisation for Economic Co-operation and Development] in Europe.”
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The government is facing questions over its management of the economy after the interest rate on 30-year government bonds – the mechanism by which the state borrows money from investors – hit 5.37% on Wednesday – the highest level since 1998.
The interest rate on the benchmark 10-year government bond also increased to the highest level since 2008 this week, prompting fears of further spending cuts as the money that was earmarked for public services is instead spent on paying off debt.
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Rachel Reeves, the chancellor, is now facing questions over whether she can still meet the fiscal rules in her budget last year, which state that the government will only borrow to invest and not for day-to-day spending.
Ms Nandy said these rules were “non-negotiable” but Conservative MPs argued in the Commons on Thursday that the current situation meant there would be a return to austerity – something the government has denied.
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The Conservatives have urged the chancellor to cancel her trip to China and instead focus on the UK economy – but Ms Reeves has decided to continue with the visit, where she will be accompanied by Bank of England governor Andrew Bailey.
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Ms Nandy said the chancellor was “absolutely” right to continue with her visit to China despite the unrest in the financial markets.
“China is the second largest economy, and what China does has the biggest impact on people from Stockton to Sunderland, right across the UK, and it’s absolutely essential that we have a relationship with them,” she argued.
“We need to make sure that the UK economy remains competitive, we need to challenge where we must, including in the area of human rights, but we also need to make sure that we are working with China on those areas of shared interest.”
