Starmer vows not to loosen Labour's fiscal rules

By GREG HEFFER, POLITICAL CORRESPONDENT and DAVID WILCOCK, DEPUTY POLITICAL EDITOR and MARK DUELL and JESSICA CLARK, SENIOR CITY REPORTER

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Sir Keir Starmer today vowed that Labour would stick to its 'iron-clad' fiscal rules - despite long-term UK borrowing costs soaring to their highest level since 1998. The yield on a 30-year gilt, or a UK government bond, hit 5.518 per cent this morning, up 16 basis points and surpassing a previous 27-year high of 5.472 per cent set in January. It came amid fresh carnage on global financial markets as US President Donald Trump declared a 'war with the world' and a new wave of American tariffs took effect.

Sir Keir Starmer today vowed that Labour would stick to its 'iron-clad' fiscal rules - despite long-term UK borrowing costs soaring to their highest level since 1998. The yield on a 30-year gilt, or a UK government bond, hit 5.518 per cent this morning, up 16 basis points and surpassing a previous 27-year high of 5.472 per cent set in January. It came amid fresh carnage on global financial markets as US President Donald Trump declared a 'war with the world' and a new wave of American tariffs took effect.

These included a 104 per cent levy on Chinese imports and 10 per cent on goods coming from the UK. After falling more than 2 per cent after opening, the FTSE 100 slumped even further around midday after China announced 84 per cent retaliatory tariffs on US imports. London's blue-chip index fell as far as 3.6 per cent, or 289 points, to 7621, before paring back the losses slightly. It finished down 2.92 per cent, or 231.05 points, at 7,679.48 for the day - a fresh 13-month low.

These included a 104 per cent levy on Chinese imports and 10 per cent on goods coming from the UK. After falling more than 2 per cent after opening, the FTSE 100 slumped even further around midday after China announced 84 per cent retaliatory tariffs on US imports. London's blue-chip index fell as far as 3.6 per cent, or 289 points, to 7621, before paring back the losses slightly. It finished down 2.92 per cent, or 231.05 points, at 7,679.48 for the day - a fresh 13-month low.

The Prime Minister reiterated that he would keep to his 'calm' and 'pragmatic' response to Mr Trump's action. The Government is continuing efforts to strike a trade deal with the White House in order to try and reduce the impact of Mr Trump's tariffs. But Sir Keir admitted this would not be 'enough' amid the global chaos wreaked by the US President. Meanwhile, Chancellor Rachel Reeves said the global trade war makes it even more 'imperative' for the UK to improve its post-Brexit relations with the EU.

The Prime Minister reiterated that he would keep to his 'calm' and 'pragmatic' response to Mr Trump's action. The Government is continuing efforts to strike a trade deal with the White House in order to try and reduce the impact of Mr Trump's tariffs. But Sir Keir admitted this would not be 'enough' amid the global chaos wreaked by the US President. Meanwhile, Chancellor Rachel Reeves said the global trade war makes it even more 'imperative' for the UK to improve its post-Brexit relations with the EU.

London was not alone in suffering fresh market chaos on Wednesday, with Germany's Dax down 3.5 per cent and France 's Cac 40 down 3.6 per cent shortly after China's announcement of retaliatory tariffs. It followed heavy drops in Asia overnight, with Japan's stock index falling more than 5 per cent at one stage over fears of an all-out trade war. The Nikkei 255 ended the day down 3.9 per cent at 31,714; the Hang Seng in Hong Kong lost 1.8 per cent to 19,769; and South Korea 's Kospi fell 1.9 per cent to 2,291. The Shanghai Composite index was trading roughly level at 3,141, while the S&P/ASX 200 in Australia declined 1.8 per cent to 7,375 and shares in New Zealand also fell.

London was not alone in suffering fresh market chaos on Wednesday, with Germany's Dax down 3.5 per cent and France 's Cac 40 down 3.6 per cent shortly after China's announcement of retaliatory tariffs. It followed heavy drops in Asia overnight, with Japan's stock index falling more than 5 per cent at one stage over fears of an all-out trade war. The Nikkei 255 ended the day down 3.9 per cent at 31,714; the Hang Seng in Hong Kong lost 1.8 per cent to 19,769; and South Korea 's Kospi fell 1.9 per cent to 2,291. The Shanghai Composite index was trading roughly level at 3,141, while the S&P/ASX 200 in Australia declined 1.8 per cent to 7,375 and shares in New Zealand also fell.

Countries had been braced for potential economic damage from the import taxes on goods entering the US from midnight Washington time - just after 5am in the UK. Deeper concerns came after a sharp rise in 30-year US Treasury yields overnight, which preceded the rise in yields in the UK and elsewhere. Bond yields move inversely to prices, and when they rise it means it is more expensive for governments to borrow money. The sell-off in UK gilts came amid rising bets from investors that the Bank of England will need to cut rates faster than previously expected this year.

Countries had been braced for potential economic damage from the import taxes on goods entering the US from midnight Washington time - just after 5am in the UK. Deeper concerns came after a sharp rise in 30-year US Treasury yields overnight, which preceded the rise in yields in the UK and elsewhere. Bond yields move inversely to prices, and when they rise it means it is more expensive for governments to borrow money. The sell-off in UK gilts came amid rising bets from investors that the Bank of England will need to cut rates faster than previously expected this year.

Most traders now expect a rate cut of at least a quarter point at the Bank's next meeting in May, while some were even pricing in a half-point drop. The surge in Government borrowing costs piled pressure on Ms Reeves, who is already struggling to meet her Budget rules by a wafer-thin margin. The rise in yields was on track to be the largest one-day move since October 2022 in the aftermath of former PM Liz Truss' failed 'mini-budget'. Ten-year gilt yields were more than 14 basis points higher at 4.753 per cent. Leading economist Mohamed El-Erian said Ms Reeves' ability to balance the books was being 'eroded' by the sell off.

Most traders now expect a rate cut of at least a quarter point at the Bank's next meeting in May, while some were even pricing in a half-point drop. The surge in Government borrowing costs piled pressure on Ms Reeves, who is already struggling to meet her Budget rules by a wafer-thin margin. The rise in yields was on track to be the largest one-day move since October 2022 in the aftermath of former PM Liz Truss' failed 'mini-budget'. Ten-year gilt yields were more than 14 basis points higher at 4.753 per cent. Leading economist Mohamed El-Erian said Ms Reeves' ability to balance the books was being 'eroded' by the sell off.

The Chancellor left herself just £9.9billion of 'headroom' in last month's Spring Statement to meet her 'non-negotiable' fiscal rules of bringing debt down within five years. But the 'significant' rise in yields, or the interest paid on Government IOUs known as gilts, meant 'more pressure on the budget and higher borrowing costs for companies and households,' El-Erian, who used to run the world's biggest bond investor Pimco, warned. 'She's going to have to have all options on the table including re-visiting her promise not to touch income taxes or VAT,' he told the BBC. Despite the surge in long-term UK borrowing costs, Sir Keir vowed to keep to Labour's fiscal rules on spending and debt.

The Chancellor left herself just £9.9billion of 'headroom' in last month's Spring Statement to meet her 'non-negotiable' fiscal rules of bringing debt down within five years. But the 'significant' rise in yields, or the interest paid on Government IOUs known as gilts, meant 'more pressure on the budget and higher borrowing costs for companies and households,' El-Erian, who used to run the world's biggest bond investor Pimco, warned. 'She's going to have to have all options on the table including re-visiting her promise not to touch income taxes or VAT,' he told the BBC. Despite the surge in long-term UK borrowing costs, Sir Keir vowed to keep to Labour's fiscal rules on spending and debt.

He told ITV 's Peston programme: 'The fiscal rules were put in for a purpose, they're ironclad, they're non-negotiable.' The PM added: 'They're not going to change, we're acting in the national interest. 'Those fiscal rules are foundational to the stability that we brought to our economy, so we go ahead in that calm way.' Sir Keir also acknowledged that doing a trade deal with the US or changing the rates of American tariffs will not be 'enough', as he stressed the world had changed. Asked if the 10 per cent tariff on importing goods to America would be in place forever, the PM replied: 'Look, I don't know. We are negotiating and we hope to improve the situation.

He told ITV 's Peston programme: 'The fiscal rules were put in for a purpose, they're ironclad, they're non-negotiable.' The PM added: 'They're not going to change, we're acting in the national interest. 'Those fiscal rules are foundational to the stability that we brought to our economy, so we go ahead in that calm way.' Sir Keir also acknowledged that doing a trade deal with the US or changing the rates of American tariffs will not be 'enough', as he stressed the world had changed. Asked if the 10 per cent tariff on importing goods to America would be in place forever, the PM replied: 'Look, I don't know. We are negotiating and we hope to improve the situation.

'But what I mean by this is that simply thinking that any change in the rates, or any deal is going to be enough, to my mind is wrong. 'Because just as we've done with defence and security, where we've recognised it's a changing world, we've got to step up and act differently. 'In that case with defence spend, co-ordinating better across Europe, so too with trade and the economy. We are actually, there's a changing world, we're entering a new era. 'We have to think and behave in a way that reflects that, and that's why we've turbocharged what we're doing on the economy.'

'But what I mean by this is that simply thinking that any change in the rates, or any deal is going to be enough, to my mind is wrong. 'Because just as we've done with defence and security, where we've recognised it's a changing world, we've got to step up and act differently. 'In that case with defence spend, co-ordinating better across Europe, so too with trade and the economy. We are actually, there's a changing world, we're entering a new era. 'We have to think and behave in a way that reflects that, and that's why we've turbocharged what we're doing on the economy.'

The PM pushed back at suggestions the financial turmoil means Labour might have to hike taxes again and slash public spending at Ms Reeves' next Budget in the autumn. 'I don't accept this proposition that it is inevitable that things will happen in six months' time,' he said. 'Our job is to make sure that we stabilise the economy and grow the economy.' In an interview with the Financial Times , Ms Reeves highlighted a planned UK-EU summit on 19 May - when Sir Keir hopes to unveil his promised Brexit 'reset' - as a chance 'to refresh our relationship and make it easier for businesses to trade'. 'I feel that in the current environment, there is a greater willingness from countries around the world to look at both tariff and non-tariff barriers that are holding back trade,' the Chancellor said.

The PM pushed back at suggestions the financial turmoil means Labour might have to hike taxes again and slash public spending at Ms Reeves' next Budget in the autumn. 'I don't accept this proposition that it is inevitable that things will happen in six months' time,' he said. 'Our job is to make sure that we stabilise the economy and grow the economy.' In an interview with the Financial Times , Ms Reeves highlighted a planned UK-EU summit on 19 May - when Sir Keir hopes to unveil his promised Brexit 'reset' - as a chance 'to refresh our relationship and make it easier for businesses to trade'. 'I feel that in the current environment, there is a greater willingness from countries around the world to look at both tariff and non-tariff barriers that are holding back trade,' the Chancellor said.

'Many of the developments, whether it is Russia's invasion of Ukraine or the challenges in global trade at the moment, mean that there's an even greater imperative to improve our trading relationships with Europe.' Ms Reeves hosted banking executives at No11 for breakfast talks about the impact of the tariffs this morning. She later agreed £128million worth of new export deals and investments with India following talks with her Indian counterpart Nirmala Sitharaman. The Chancellor has vowed to accelerate trade deals with the rest of the world, in response to Mr Trump's tariffs. Ahead of his tariffs coming into effect, Mr Trump told Republican politicians last night: 'They ripped us off left and right. But now it's our turn to do the ripping.

'Many of the developments, whether it is Russia's invasion of Ukraine or the challenges in global trade at the moment, mean that there's an even greater imperative to improve our trading relationships with Europe.' Ms Reeves hosted banking executives at No11 for breakfast talks about the impact of the tariffs this morning. She later agreed £128million worth of new export deals and investments with India following talks with her Indian counterpart Nirmala Sitharaman. The Chancellor has vowed to accelerate trade deals with the rest of the world, in response to Mr Trump's tariffs. Ahead of his tariffs coming into effect, Mr Trump told Republican politicians last night: 'They ripped us off left and right. But now it's our turn to do the ripping.

'And I do think that the war with the world, which is not a war at all, because they're all coming here. Japan is coming here as we speak. 'They're in a plane, flying lots of them, all tough negotiators, but things that people wouldn't have given us two years ago ... three years ago, five years ago, seven - they're giving us everything. They don't want tariffs on themselves.' On Wall Street yesterday, the S&P 500 dropped 1.6 per cent after wiping out an early gain of 4.1 per cent. That took it nearly 19 per cent below its record set in February. The S&P 500 has shed nearly $6trillion since Mr Trump unveiled the tariffs last week, the deepest four-day loss since the benchmark's creation in the 1950s. The index is now nearing a bear market, defined as 20 per cent below its most recent high.

'And I do think that the war with the world, which is not a war at all, because they're all coming here. Japan is coming here as we speak. 'They're in a plane, flying lots of them, all tough negotiators, but things that people wouldn't have given us two years ago ... three years ago, five years ago, seven - they're giving us everything. They don't want tariffs on themselves.' On Wall Street yesterday, the S&P 500 dropped 1.6 per cent after wiping out an early gain of 4.1 per cent. That took it nearly 19 per cent below its record set in February. The S&P 500 has shed nearly $6trillion since Mr Trump unveiled the tariffs last week, the deepest four-day loss since the benchmark's creation in the 1950s. The index is now nearing a bear market, defined as 20 per cent below its most recent high.

The Dow Jones Industrial Average dropped 0.8 per cent, while the Nasdaq composite lost 2.1 per cent. But the FTSE 100 in London rose 2.7 per cent to 7,911 yesterday. Beijing had vowed to 'fight to the end' and warned of countermeasures after Mr Trump threatened on Monday to raise his levies even further on the world's second-largest economy. However, US stocks slid during evening trading on Wall Street after the White House confirmed a 104 per cent tariff rate on some Chinese imports would become a reality. Britain faces the lowest 10 per cent 'baseline' tariff rate and has resisted imposing immediate retaliatory action, unlike the European Union which is impacted by a 20 per cent import tax.

The Dow Jones Industrial Average dropped 0.8 per cent, while the Nasdaq composite lost 2.1 per cent. But the FTSE 100 in London rose 2.7 per cent to 7,911 yesterday. Beijing had vowed to 'fight to the end' and warned of countermeasures after Mr Trump threatened on Monday to raise his levies even further on the world's second-largest economy. However, US stocks slid during evening trading on Wall Street after the White House confirmed a 104 per cent tariff rate on some Chinese imports would become a reality. Britain faces the lowest 10 per cent 'baseline' tariff rate and has resisted imposing immediate retaliatory action, unlike the European Union which is impacted by a 20 per cent import tax.

Ministers still hope an economic agreement with Washington can be reached to soften the blow of the levy which strikes UK goods, along with a 25 per cent import tax on cars and separate ones for steel and aluminum. But the Government will also seek to strengthen trade ties with other countries, including by trying to rebuild relations with the EU. The Chancellor said: 'In a changing world, this Government is accelerating trade deals with the rest of the world to back British business and provide the security working people deserve. 'We are going further, faster to create the best possible conditions for British business by working to reduce barriers to trade.'

Ministers still hope an economic agreement with Washington can be reached to soften the blow of the levy which strikes UK goods, along with a 25 per cent import tax on cars and separate ones for steel and aluminum. But the Government will also seek to strengthen trade ties with other countries, including by trying to rebuild relations with the EU. The Chancellor said: 'In a changing world, this Government is accelerating trade deals with the rest of the world to back British business and provide the security working people deserve. 'We are going further, faster to create the best possible conditions for British business by working to reduce barriers to trade.'

The UK has been through more than a dozen rounds of talks since 2022 over a potential agreement with India , which is forecast to become the world's largest economy. Key sticking points were said to include visa rules for Indian students and professionals, as well as access for British service firms. Speaking to MPs on Parliament's Liaison Committee yesterday, the PM reiterated his opposition to immediate countermeasures in response to Mr Trump's tariffs but said all options remained on the table. 'My instinct is that we shouldn't jump in with both feet to retaliate. So in that sense, I'm not changing my plans,' Sir Keir said.

The UK has been through more than a dozen rounds of talks since 2022 over a potential agreement with India , which is forecast to become the world's largest economy. Key sticking points were said to include visa rules for Indian students and professionals, as well as access for British service firms. Speaking to MPs on Parliament's Liaison Committee yesterday, the PM reiterated his opposition to immediate countermeasures in response to Mr Trump's tariffs but said all options remained on the table. 'My instinct is that we shouldn't jump in with both feet to retaliate. So in that sense, I'm not changing my plans,' Sir Keir said.

'Obviously we have to keep our options on the table and do the preparatory work for retaliation if necessary. But I think that trying to negotiate an arrangement which mitigates the tariffs is better.' But Sir Keir indicated he wants to protect the NHS from US commercial interests, and was also 'very clear' that a digital tax on big tech firms should remain in place, despite reports the levy could be abolished as part of a deal with America. 'I have been very protective of the approach we take to the NHS in any dealings with any other country because it is our greatest asset, and we are not trading it away,' he said. The tariffs are not a 'temporary passing phase' but part of a 'changing world order', the PM added.

'Obviously we have to keep our options on the table and do the preparatory work for retaliation if necessary. But I think that trying to negotiate an arrangement which mitigates the tariffs is better.' But Sir Keir indicated he wants to protect the NHS from US commercial interests, and was also 'very clear' that a digital tax on big tech firms should remain in place, despite reports the levy could be abolished as part of a deal with America. 'I have been very protective of the approach we take to the NHS in any dealings with any other country because it is our greatest asset, and we are not trading it away,' he said. The tariffs are not a 'temporary passing phase' but part of a 'changing world order', the PM added.

A 10 per cent import tax on goods coming into America from around the world kicked in on Saturday morning, while a 25 per cent levy on foreign cars had come into force on Thursday. On Wednesday, White House tariffs were introduced for about 60 countries it describes as the 'worst offenders' in terms of charging higher tariffs on US goods or implementing 'non-tariff' barriers to American trade. These include the EU, China, Japan, Thailand, Vietnam, Cambodia, South Africa and Taiwan. Mr Trump says the tariffs are necessary to narrow trade deficits, which measure how much more the US imports from other countries than it sends to them as exports.

A 10 per cent import tax on goods coming into America from around the world kicked in on Saturday morning, while a 25 per cent levy on foreign cars had come into force on Thursday. On Wednesday, White House tariffs were introduced for about 60 countries it describes as the 'worst offenders' in terms of charging higher tariffs on US goods or implementing 'non-tariff' barriers to American trade. These include the EU, China, Japan, Thailand, Vietnam, Cambodia, South Africa and Taiwan. Mr Trump says the tariffs are necessary to narrow trade deficits, which measure how much more the US imports from other countries than it sends to them as exports.

In a speech to a Republican Congressional Committee dinner last night, he promised a 'major tariff' on pharmaceuticals would be announced 'very shortly', according to the BBC . Speaking to broadcasters yesterday evening, Labour health minister Stephen Kinnock said the global headwinds were 'very turbulent' and that rebuilding relations with Brussels would be key to protecting the UK. 'We live in an incredibly deeply integrated global economy with very integrated supply chains and hugely interdependent commercial relationships, so nobody benefits from a trade war,' he told Sky News .

In a speech to a Republican Congressional Committee dinner last night, he promised a 'major tariff' on pharmaceuticals would be announced 'very shortly', according to the BBC . Speaking to broadcasters yesterday evening, Labour health minister Stephen Kinnock said the global headwinds were 'very turbulent' and that rebuilding relations with Brussels would be key to protecting the UK. 'We live in an incredibly deeply integrated global economy with very integrated supply chains and hugely interdependent commercial relationships, so nobody benefits from a trade war,' he told Sky News .

He said the UK was focused on strengthening ties with the EU, developing an industrial strategy to enable Britain to 'stand firmly on its own two feet' and negotiating an agreement with the US. 'I think the combination of those three things is going to help us to weather the storm,' the minister said.

He said the UK was focused on strengthening ties with the EU, developing an industrial strategy to enable Britain to 'stand firmly on its own two feet' and negotiating an agreement with the US. 'I think the combination of those three things is going to help us to weather the storm,' the minister said.

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