UK-China Economic and Financial Dialogue

Rachel Reeves Excerpts

Tuesday 14th January 2025 Commons Chamber

[The Chancellor of the Exchequer (Rachel Reeves)]

Growth is the No. 1 mission of this Labour Government. To grow the economy, we need to help Great British businesses to export around the world, including to China, the second biggest economy in the world and our fourth-largest trading partner. Not engaging is simply not an option. That is why I led a delegation, including the Governor of the Bank of England, the chief executive of the Financial Conduct Authority and representatives of some of Britain’s largest financial service firms, including HSBC, Standard Chartered and Schroders, to the 2025 UK-China economic and financial dialogue—the first of its kind since 2019.

This dialogue has delivered a set of tangible benefits to ensure that British firms have greater access to the Chinese market, while safeguarding our national security—the first duty of any Government. In China, I met outstanding British companies, such as Brompton, Jaguar Land Rover and AstraZeneca, that will benefit from the steps that we have agreed. We have worked to lift market access barriers across a range of goods and services, particularly in the agrifood sector. On financial services, we have successfully secured new licences and quota allocations for UK firms to improve operating access in China. We agreed to co-operate further, including by renewing our shared commitment to the UK-China stock connect scheme, first launched in 2019, by deepening our co-operation on wealth management through a UK-China wealth connect scheme, and by progressing initiatives on pensions and sustainable finance, delivering significant benefits for UK firms and the City of London. I am pleased that China agreed to issue its first ever overseas sovereign green bond in London in 2025, underlining the UK’s position as a global capital for high-quality sustainable finance.

The UK is a global leader in financial services. There are significant opportunities to expand our presence in new markets, and the tangible outcomes we have delivered this week will help to deliver that. These steps are part of a wider programme to make substantive progress on improving arrangements for UK exporters and investors, as reflected in new agreements on vaccine approvals, fertiliser, whisky labelling, legal services, automotives and accountancy, which have set us on course for this dialogue to unlock £1 billion of value for the UK economy.

These outcomes, agreed with my counterpart Vice-Premier He Lifeng, represent pragmatic co-operation in action, and support secure and resilient economic growth, because security and economic growth go hand in hand. That means finding the right way to build a stable and balanced relationship with China that is in our national interest—one that recognises the importance of co-operation in addressing the global issues that we face, of competing where our interests differ, and of challenging robustly whenever that is required. In Beijing and Shanghai, I was clear that while we must co-operate on areas of mutual interest, we will confidently challenge on areas where we disagree. I expressed our country’s real economic and trade concerns to the Chinese, including about trade imbalances and economic security, and I raised concerns about Russia’s illegal war in Ukraine, human rights, and restrictions on rights and freedoms in Hong Kong, including the case of Jimmy Lai and the completely unjustified sanctions against British parliamentarians.

A key outcome of this dialogue is that we have secured China’s commitment to improving existing channels, so that we can openly discuss sensitive issues and the ways in which they impact our economy, because if we do not engage with China, we cannot raise our real concerns. This dialogue is just one part of our engagement with trading partners across the world. Since becoming Chancellor, I have been to New York, Washington, Toronto and Brussels to build our global economic relationships, while my right hon. Friend the Business Secretary has travelled to the Gulf to boost trade and investment, and my right hon. Friend the Foreign Secretary is engaging with partners all over the world to deliver growth that benefits people across the United Kingdom.

We must continue to go further, faster, in driving economic growth to make working people better off. That is why the Prime Minister launched our artificial intelligence opportunities action plan yesterday. It throws the full weight of Government behind AI in the UK to revolutionise our public services and make our economy more productive. It is why next week I will talk to business leaders, investors and entrepreneurs at the World Economic Forum meeting in Davos to make the case that the UK is one of the best places in the world in which to invest. In the coming weeks, I will set out further details of our plans to kick-start growth in the economy after 14 years of failure from the Conservative party.

[Mr Speaker]

I call the shadow Chancellor of the Exchequer.

[Mel Stride (Central Devon) (Con)]

It is good to see the Chancellor in her place, and I thank her for advance sight of her statement. I know that she has been away, so let me update her on the mess that she left behind. The pound has hit a 14-month low; Government borrowing costs are at a 27-year high; growth has been killed stone dead; inflation is rising, impacting millions; interest rates are staying higher for longer; and business confidence has fallen through the floor. The Labour party talked down the economy and crippled businesses with colossal taxes, breaking all their promises. This is a crisis made in Downing Street.

It should hardly surprise the Chancellor that international markets are uneasy. The UK’s long-term borrowing costs have risen to their highest in almost 30 years. But while the Government were losing control of the economy, where was the Chancellor? Her trip to China had not even begun when my urgent question was taken in the House last week. She was still in the country, but she sent the Chief Secretary to the Treasury, rather than facing up to her failures. May I ask her why she chose not to respond herself?

The Chancellor, of course, ducked the difficult questions by jetting off to Beijing. I believe that in Labour circles they are calling it the Peking duck, but whatever was on the menu in China, was it really worth the unedifying sight of an increasingly desperate politician scampering halfway around the world with a begging bowl? The Chancellor’s deal pales in comparison to Labour’s black hole, which opened up in the public finances while the right hon. Lady was absent from her station.

Let me give the House a sense of scale. The deal that the Chancellor has announced amounts to £120 million a year. The rise in our borrowing costs, due to her disastrous Budget, has added about £12 billion to our annual spending on debt interest alone: literally 100 times what she says she has brought back from Beijing. That is money that cannot now be spent on the public’s priorities. That £12 billion is enough to pay for 300,000 nurses or to cover Labour’s pernicious winter fuel payments cut for eight and a half years—and, of course, even before this latest market reaction, the Budget meant spending tens of billions more on servicing our debt. According to the Office for Budget Responsibility’s forecast, two thirds of the money raised from the Chancellor’s jobs tax will be swallowed up by additional debt interest. Forget those billions going towards better public services; they are going on paying the price of Labour’s mismanagement.

We on this side of the House know how this sorry story goes. We have seen it all before: socialist Governments who think that they can tax and spend their way to prosperity; Labour Governments who simply do not understand that if you tax the living daylights out of business, you will get stagnation. They do not understand because there is barely a shred of business experience on the Government Front Bench. May I ask the right hon. Lady which of her promises she will break if the OBR judges in March that she is now in breach of her own fiscal rules? Will she cancel promised spending, will she ramp up borrowing, or will she raise taxes yet again?

This whole sorry tale is nothing short of a Shakespearean tragedy being played out before our eyes. This is the Hamlet of our time. Labour promised the electorate much, while pouring the poison into their ear. And the end—you can feel the end; the Chancellor flailing, estranged, it seems, from those closest to her; those about her falling; the drums beating ever closer. To go, or not to go, that is now a question. The Prime Minister will be damned if he does, but he will surely be damned if he does not. The British people deserve better.

[Rachel Reeves]

The shadow Chancellor is simply not serious. I was on the Opposition side of the House for 14 years, and I think that after a statement one usually asks some questions.

We heard a great deal from the right hon. Gentleman about what he would not do, but we heard absolutely nothing about what he would do. Now we can see what happens when the Leader of the Opposition tells the shadow Cabinet that it should not have any policies. As far as I can tell, the Conservative party’s economic strategy is to say that the UK should not engage with the second largest economy in the world, or indeed with our nearest neighbours and our biggest trading partners in the European Union. The right hon. Gentleman’s economic strategy is to support higher spending but none of the right decisions that are required to deliver sound public finances, and his economic strategy is to ignore the mistakes of the past with no apology to the British people for his part in Liz Truss’s mini-Budget that crashed the economy. I appreciate that, having said that, I may now receive a “cease and desist” letter from her later.

One question that the shadow Chancellor did ask was: why did I go to China? I went to secure tangible benefits for British businesses trading overseas. The right hon. Gentleman said that it was not worth it; let him say that to the representatives of HSBC, Standard Chartered, Prudential, Schroders and the London Stock Exchange who attended those meetings with me last week, all of whom have spoken of the difference that it will make.

I have been under no illusion about the scale of challenges that we face, after 14 years of stagnant economic growth, higher debt and economic uncertainty, and we have seen global economic uncertainty play out in the last week, but leadership is not about ducking these challenges; it is about rising to them. The economic headwinds we face are a reminder that we should—indeed, we must—go further and faster in our plan to kick-start economic growth, which plunged under the last Government, by bringing stability to the public finances after years of instability under the Conservative party, unlocking investment that plummeted under the previous Government and pushing ahead with essential reforms to our economy and public services. That is my message to the House today, because if we get it right, the prize on offer to us—to the British people—is immense: the opportunity to make working people better off by making Britain better off. That is the mandate this Government have, and that is what we will deliver.

[Mr Speaker]

I call the Chair of the Treasury Committee.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I welcome my right hon. Friend’s commitment to growth in this country and to encouraging investment in the UK. Listening to the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride), we would think the country was going to hell in a handcart. Does my right hon. Friend agree that this is no time for panic, that it is perfectly possible to manage any pressures on the Budget through astute management of public spending, and that we are a very long way from the approach taken during the years of austerity under the Conservative party?

[Rachel Reeves]

I thank the Chair of the Select Committee for that question. I set out this Government’s fiscal rules at the Budget in October: we will pay for day-to-day spending through tax receipts, and we will get debt down as a share of the economy. We remain committed to those fiscal rules and will meet them at all times.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

[Daisy Cooper (St Albans) (LD)]

I thank the Chancellor for advance sight of her statement.

Let us be blunt: the Budget has not worked. The Chancellor says that the Government’s No. 1 mission is growth, but to date there are no signs that the Government are going to deliver it. The national insurance contributions rise is self-defeating. It undermines growth—it does not unleash it—and it piles pressure on to struggling small businesses and high streets. Nor does it raise anything like the sums of money for the NHS that the Government initially suggested it would. Now we have this much-lauded visit to China, which the Government themselves say is only worth £600 million to the UK over the next five years. That is equivalent to just five and a half hours of NHS spending a year—27.5 hours over the five-year period. All growth is welcome, but this really is small beer.

What are we to make of the Chancellor’s pledge to improve existing channels with China? It is nothing short of warm words and mixed messages. The Chancellor should not have gone to China unless there was a commitment that Jimmy Lai was going to be released.

Does the Chancellor now accept that the national insurance increase will damage growth? Does she accept that there were and still are much fairer ways to raise the necessary revenue without holding back our economy and our high streets? The international market jitters we have seen in the last few days are largely caused by the threat of tariffs by the new Trump Administration, so will the Chancellor guard against the risks of a Trump presidency by rebuilding our trading relationship with our European neighbours?

After the economic vandalism of the previous Conservative Government and their mini-Budget, our NHS and care services are still on their knees. Does the Chancellor accept that wealth and health are two sides of the same coin and that scaling back any investment in the NHS will be not only devastating for local communities but damaging for economic growth?

[Rachel Reeves]

I am slightly confused by the hon. Lady’s response. The Liberal Democrats opposed every decision we made to get the public finances under control at the Budget, and now they say that we need to spend more on public services. Well, I am afraid they cannot have it both ways. The only way there is more money for our public services is by raising it, as we did in the Budget—decisions that the Liberal Democrats apparently oppose.

The hon. Lady says that £600 million is not worth it. That is £600 million of tangible benefits for British businesses trading overseas. I would have thought she would welcome enhanced trade and investment as a way to create more good jobs paying decent wages in St Albans and, indeed, in all our constituencies.

The hon. Lady says that we should not go to China because we need to raise difficult issues. I am not sure how she thinks we are going to raise difficult issues unless we engage with the second biggest economy in the world. Because I went to China, I was able to raise issues around human rights, forced labour, Hong Kong and Jimmy Lai and the sanctioning of parliamentarians. We cannot raise those issues unless we are in the room. I was in the room and therefore able to do just that.

Labour is the party that put £20 billion into the national health service at the Budget in October. We were able to do that because of the difficult decisions we took, including on taxation. The hon. Lady seems to want the additional money for public services but without finding any way to pay for them. That is the way the Conservative party got into its troubles. I am afraid the Liberal Democrats are going down exactly the same path.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

May I thank the Chancellor for raising the case of my constituent, Jimmy Lai? I know it will mean a lot to him and his family. Does she agree that it is because of the profound differences that it is vital we maintain this strategic engagement?

[Rachel Reeves]

I thank my hon. Friend for what she has just said. On behalf of the whole House, I want to send our best wishes to the family of Jimmy Lai at this difficult time. I had the opportunity to raise this as well as other issues during my time in China, and it is incredibly important that at every opportunity we have, we raise some of the difficult issues and challenge the Chinese authorities in a way that is appropriate and consistent with our British values.

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

The economic and financial dialogue was stayed because of the brutal imposition of the national security law in Hong Kong. When the Chancellor and the Government go back to engage and reopen that dialogue, they do so on the back of things getting worse, not better. The reality I put to her is that while she was away, Shein refused point blank at a Select Committee hearing to answer the question of whether it has slave labour in its supply chain, but the Government want it to list here in London. We have solar arrays being imported by the Government into the UK that demonstrably involve slave labour. Can the Chancellor be clear with the House about the Government’s position on slave labour? Can she explain whether this Government will allow any products or services, or allow companies to align themselves here or import goods here, that contain any slave labour, no matter how important that import is?

[Rachel Reeves]

I thank the right hon. Gentleman for that question; I know how seriously he takes this issue, like so many other Members on both sides of the House. Listing of companies in the UK is a decision for the Financial Conduct Authority, but any company listing on the London stock exchange has to live up to the responsibilities set out by the United Nations and the OECD on forced labour.

This Government are committed to working with international partners and businesses to ensure that global supply chains are free from human and labour rights abuses. As the right hon. Gentleman knows, under section 54 of the Modern Slavery Act 2015, commercial businesses that operate in the UK and have a turnover of more than £36 million are required to report annually on the steps they have taken, and rightly so, because modern slavery is abhorrent, and this Government continue to take steps to deal with it.

[Dr Jeevun Sandher (Loughborough) (Lab)]

First, may I remind Conservative Members that UK bond yields are rising for the same reason that German and French bond yields are—because they are tracking the US rate? They never were very good at numbers.

The Chancellor has set out her economic philosophy that our prosperity is built upon secure foundations in a more uncertain world. Will she set out how she is building that economic security here, particularly with reference to having domestic energy, rather than being dependent on foreign fossil fuel dictators?

[Rachel Reeves]

My hon. Friend is absolutely right to say that economic growth has to be built on strong foundations, which is the approach of this Government. Our mission to make Britain a clean energy superpower is consistent with that. If we can ween ourselves off fossil fuels and the oil of dictators, we will be more secure in our economy, because we will not have to import so much from overseas.

[Dame Harriett Baldwin (West Worcestershire) (Con)]

It is good to see the Chancellor back from China and to hear her reiterate that growth is her No. 1 mission, because we have not had any growth since her Budget. Given that accepting responsibility is the first step in solving a problem, will she accept that last October’s Budget has caused business confidence and growth prospects in this country’s economy to plunge?

[Rachel Reeves]

I thought for a moment that the hon. Lady was going to apologise for Liz Truss’s mini-Budget. Maybe she will do so on another occasion.

[Yuan Yang (Earley and Woodley) (Lab)]

I thank the Chancellor for raising the case of Jimmy Lai. I hope that the Government will in future press the case of pensions owed to British national overseas constituents in Earley and Woodley, and across the UK, who have moved here from Hong Kong.

I was surprised to hear the shadow Chancellor advocate knee-jerk responses to inter-day movements in market prices. I would argue that such short-termism led to the Conservative party having five Chancellors in only four years. Will the Chancellor reassure us that she will not be misled by short-termism, and that she will instead keep her focus on our Government’s long-term ambition to raise living standards and growth?

[Rachel Reeves]

My hon. Friend is absolutely right. There have been movements in international markets in the past week or so, and they have been global in nature. In the UK, we must do what we can, which is why I have reiterated today my commitment to the fiscal rules that I set out in the Budget in October. I reiterate that growth is the No. 1 mission of this Government: growth built on stability, which will come through securing the public finances; through investment, including through the national wealth fund and GB Energy; and through reform—of our planning system to make it easier to build in Britain, getting people back to work, and of our pension system. This Government are cracking on after 14 years of failure from the Conservative party.

[Esther McVey (Tatton) (Con)]

Did the Communist party of China tell the Chancellor that she was doing a good job or a bad job of running the UK economy when she was there?

[Rachel Reeves]

I was not seeking assurance from any foreign Government on the performance of this Government. What I was seeking—I achieved this in China—were tangible outputs for British businesses trading overseas, helping to create more good jobs that pay decent wages here in Britain. The Conservative party absolutely failed to do that in 14 years.

[Tim Roca (Macclesfield) (Lab)]

I thank the Chancellor for her statement. I particularly welcome the fact that she raised the issues of Jimmy Lai and human rights in Beijing, which is really important. After 14 years of the Conservative party’s inconsistency on China, does she agree that we need a cross-Whitehall strategy and a pragmatic approach?

[Rachel Reeves]

What is really important is that we take decisions in Britain’s national interest. Taking decisions in the national interest means engaging with our trading partners all around the world, which is why, since being appointed as Chancellor, I have been to Brussels to reset our relations with the European Union, as well as to Washington and New York to welcome investment from overseas. I have secured £600 million-worth of benefits for UK businesses doing business in China.

[Stephen Flynn (Aberdeen South) (SNP)]

Will the Chancellor of the Exchequer do what the Prime Minister refused to do yesterday and rule out future spending cuts?

[Rachel Reeves]

I am not going to write five years’ worth of Budgets in the first six months of a Labour Government, but I am absolutely committed to meeting the fiscal rules that I set out in the Budget in October. We know what happens when Governments lose control of the public finances: they crash the economy and end up on the Opposition Benches.

[John Grady (Glasgow East) (Lab)]

The Chancellor may be able to learn a bit about emergency spending cuts from the Scottish Government in Holyrood, who have had three years of emergency spending cuts. Does the Chancellor agree that it is essential to engage with large economies like China so that we can export our brilliant financial services sector and whisky from Scotland? In the real world, we have to trade with large economies like China.

[Rachel Reeves]

Many of the benefits that we secured last week were for the financial services sector, and both Edinburgh and Glasgow are important hubs of financial services in the UK. Businesses such as Abrdn and Standard Chartered, which were on the delegation with me, have welcomed the tangible benefits, which will result in more jobs and more economic prosperity in Scotland and across the United Kingdom.

[Martin Vickers (Brigg and Immingham) (Con)]

It has been reported that the Chancellor was going to meet the owners of British Steel in China. Many of my constituents work at the Scunthorpe steelworks. While I appreciate that Ministers may not have reached a final decision on the steelworks, is she able to give reassurance to my constituents that she has had constructive engagement?

[Rachel Reeves]

My right hon. Friend the Business Secretary has met Mr Li, from Jingye, on a number of occasions. Talks are ongoing, but I am not able to provide an update on that today.

[Preet Kaur Gill (Birmingham Edgbaston) (Lab/Co-op)]

The Chancellor has only my admiration and support for the tough decisions that she is taking to fix the fundamentals. While Conservative Members were carping about the Chancellor’s whereabouts this week, she was having serious discussions with the world’s second largest economy and securing access for UK firms. Is it not clear that only Labour Members are serious about growth?

[Rachel Reeves]

I will always stand up for Britain’s national and economic interest, which is why I am helping some of our best businesses to export around the world. That is what I did in China at the weekend, and it is what I will continue to do. I will always stand up for our economic interest.

[Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)]

Has the Chancellor of the Exchequer spoken to the Governor of the Bank of England about what action needs to be taken to bring about stability in our bond markets?

[Rachel Reeves]

I regularly speak to the Governor of the Bank of England; indeed, he was with me on the delegation to China this weekend. We work closely together to ensure that the British economy remains competitive in global markets.

[Katie White (Leeds North West) (Lab)]

I am quite surprised at the audaciousness of those on the Opposition Benches. The Conservatives oversaw a rise in debt levels over the last 14 years, and it is a shame that they did not turn their minds to the issue earlier. Does the Chancellor agree that serious discussions, such as the one with China, can deliver not just on our economic aims, but on our wider climate and international objectives?

[Rachel Reeves]

Unless we engage and work with our partners around the world, we will miss out on the opportunities that other countries secure for their businesses and economies. If we miss out on those investment and trade opportunities, we can be sure that other countries will take advantage of them. That is why I was in China, and it is why I will work with counterparts around the world to secure good outcomes for British businesses and jobs here in the United Kingdom.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

The Chancellor raised the issue of human rights abuses in China, but did she get the opportunity to raise with her interlocutors the extrajudicial work of the United Front Work Department, particularly in relation to UK institutions, especially universities?

[Rachel Reeves]

I raised a number of issues around human rights abuses, labour and, indeed, rights and freedoms in Hong Kong, including the case of Jimmy Lai. I raised that with all the Ministers I met in China, and I will always stand up for our values and interests.

[Kanishka Narayan (Vale of Glamorgan) (Lab)]

Unlike the bickering in the Conservative party, we are cutting deals in the national interest and putting Britain at the frontier—£600 million just over the weekend, and an AI opportunities plan just this week. Does the Chancellor agree that we are the party of action and the Conservatives are the party of rhetoric?

[Rachel Reeves]

We on the Government Benches are not going to apologise for getting a good deal for British businesses and the people working for them. I am determined to leave no stone unturned in ensuring that British businesses have the rights and freedoms to export and trade around the world, helping to create good jobs here in Britain.

[Sarah Olney (Richmond Park) (LD)]

UK exports to China currently represent less than 10% of the UK’s total exports, whereas our exports to the EU represent over 40%, demonstrating the greater opportunities that trading with the EU makes available to our small and medium enterprises. Will the Chancellor commit to talking four times as much to our European partners about our trading opportunities than she has to China?

[Rachel Reeves]

This is not either/or; we cannot write off one country and say that we are going to put all our eggs in a different basket. China is our fourth biggest trading partner and we cannot miss out on opportunities in a country that is growing quickly, with an expanding middle class, where there are huge export opportunities. As the hon. Lady knows, I was in Brussels in December to reset our relations—the first British Chancellor to go to a Eurogroup meeting since we left the European Union. I am leaving no stone unturned in exploiting export opportunities for British businesses.

[Callum Anderson (Buckingham and Bletchley) (Lab)]

I thank the Chancellor for her statement. Can she set out in more detail how the Government intend to help reinvigorate the UK-China stock connect, so that UK companies and investors can access Chinese capital markets and vice versa?

[Rachel Reeves]

The stock connect is an initiative first set up by the former Conservative Chancellor Philip Hammond to improve links between the Shanghai and London stock exchanges and to help Chinese businesses to access capital on UK financial markets. That is good for financial services firms operating in London, and the enhancement of that stock connect scheme at the weekend offers new opportunities for British businesses in financial services in the UK.

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

As the Chancellor flew east, the pound plummeted south and Government debt rocketed north. Why? The markets do not believe her plan for growth; that is the fundamental issue. To pick up the question from my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson), what is she going to say to the markets to make them believe she really does understand how to deliver growth in the UK?

[Rachel Reeves]

There has been global volatility in markets. It is not reasonable to suggest that bond yields in the United States, Germany and France have risen because of decisions made by this Government. I think the hon. Member should just get real.

[Brian Leishman (Alloa and Grangemouth) (Lab)]

I thank the Chancellor for her statement. In regard to raising money for public services, an annual wealth tax on the multimillionaire and billionaire class would certainly achieve that. However, that is a conversation for another day—on to China. My right hon. Friend and I have had discussions regarding the closure of the Grangemouth refinery, in which PetroChina—part of the Chinese state-owned China National Petroleum Corporation—is heavily involved. If the refinery closes, thousands of jobs will be lost. This is not just a constituency issue for me. It will impact all of Scotland, as our fuel and national security will be severely weakened. Did the Chancellor speak about the issue with her Chinese counterparts, and if not, will she do so?

[Rachel Reeves]

We are working closely with the Scottish Government to ensure that there is a bright future for the people of Grangemouth, because deindustrialisation should not be the future for communities, including in Scotland.

[Richard Tice (Boston and Skegness) (Reform)]

The data in September and October shows that the economy is falling. It is going down and the currency markets and bond markets are selling off and expressing their clear concern that there is no growth and that the economy continues to fall. If the Chancellor is so confident, will she confirm to the House when the economy will start growing again?

[Rachel Reeves]

Growth is the No. 1 mission of this Labour Government, but the truth is that it is not possible to turn things around quickly after 14 years of lacklustre growth and declining living standards under the Conservatives. We are leaving no stone unturned, which is why last week in China we secured £600 million-worth of tangible benefits for the UK economy, helping great British businesses exporting overseas.

[Nesil Caliskan (Barking) (Lab)]

Does the Chancellor agree that developing our economic and trading relationships with other nations is one of many important levers; and that, alongside that approach, public investment, planning reforms and an industrial strategy—whose absence under the Conservative Government was problematic—will be returned under this Government so that we can see economic growth?

[Rachel Reeves]

The best way to grow an economy is to boost investment in an economy. The truth is that, under the Conservatives, we were the only G7 economy where investment stood at less than 20% of GDP. That is the inheritance that our party was bequeathed by the Conservatives, but we are beginning to turn that around through the creation of a national wealth fund to leverage in private sector investment, through planning reform to get Britain building again, and through pensions reform to unlock £80 billion of investment to help small and start-up businesses to grow. We are turning things around after 14 years of failure from the Conservative party.

[Paul Holmes (Hamble Valley) (Con)]

While the Chancellor was in China securing her measly £600 million, borrowing rates reached the highest they have been since 2008. In 2024 she said that her Budget would be

“a Budget with real ambition, a Budget to fix the foundations…a Budget to rebuild Britain.”

How is that going, given that her mess has caused borrowing to be the highest it has been since 2008, making real working people in this country suffer?

[Rachel Reeves]

I am not sure whether the hon. Gentleman follows global financial markets, but borrowing costs have increased for countries around the world. What we saw under Liz Truss’s mini-Budget was unique to the United Kingdom, because it was only UK markets that were affected by the decisions of the Conservatives.

[Chris McDonald (Stockton North) (Lab)]

It is great to see our Chancellor of the Exchequer working with international business and winning investment for the UK. Does she agree that while the Conservatives were happy to sell out our heavy industry to China, leading to the end of steelmaking in Teesside after 150 years, our industrial strategy is delivering investment in steel, chemicals and life sciences in Stockton North, in Teesside and across the UK?

[Rachel Reeves]

The national wealth fund created by this Government will get investment into industries such as carbon capture and storage, green hydrogen, ports and, indeed, steel. We were really pleased at the end of last year to be able to announce investment in carbon capture and storage in Merseyside and Teesside, securing billions of pounds of investment into those economies and securing many thousands of jobs.

[Luke Murphy (Basingstoke) (Lab)]

I thank the Chancellor for her statement. I think it is worth reminding the House that under the previous Government business investment fell to 28th out of 31 OECD countries, which was lower than Latvia, Slovenia and Hungary. Could the Chancellor set out how our industrial strategy will overcome that terrible legacy on business investment left by the Conservatives?

[Rachel Reeves]

One of the reasons for such poor investment—the lowest of all the G7 economies—is that our planning system makes it so hard to get anything done in this country. That is why the planning and infrastructure Bill, which is being brought forward by my right hon. Friend the Deputy Prime Minister, will turn that around, making it easier to invest in transport, in digital, in housing and in so much more. That is the way to get our economy growing after 14 years of failure.

[Carla Lockhart (Upper Bann) (DUP)]

I thank the Chancellor for her statement. She goes to China, New York, Washington, Toronto and Brussels to build economic relationships, yet she will not take the time to speak with the Ulster Farmers Union, the NFU, the Farmers Union of Wales or NFU Scotland to hear at first hand about the devastating impact that her death tax will have on family farms and small businesses. When will she realise that no matter what deals she does around the world—and I welcome them—Rome is burning around her? Agriculture is the backbone of our economy, so will she commit to meet me as a representative of the thousands of farmers whose farms are going to be decimated by her death tax?

[Rachel Reeves]

I have had the opportunity on a couple of occasions to meet the First Minister and Deputy First Minister of Northern Ireland, and I am sure that the Secretary of State for Environment, Food and Rural Affairs, my right hon. Friend the Member for Streatham and Croydon North (Steve Reed), would be happy to meet colleagues from Northern Ireland. The truth is that we inherited a £22 billion black hole in the public finances from the Conservatives, and in order to stabilise our public finances we had to make difficult decisions on taxes. At the moment we hear from the Opposition that they do not like the increases in taxes but they want increases in public spending. Well, they cannot have it both ways.

[Ms Polly Billington (East Thanet) (Lab)]

I welcome my right hon. Friend’s statement. Could she elaborate further on how this visit and the discussions she has started are not only consistent with the Government’s approach to China, but a vital part of it—co-operate where we can, compete where we need to, and challenge where we must?

[Rachel Reeves]

This is the first economic and financial dialogue between our two countries since 2019. Since then, other countries around the world have continued to engage with China, securing tangible benefits for their economies. I do not want UK businesses and the people working in our country to miss out, which is why this weekend we secured £600 million-worth of tangible benefits for businesses that export to China, thereby helping to create more good jobs paying decent wages in our country.

[Nick Timothy (West Suffolk) (Con)]

I am slightly worried that investors will be watching this statement and wondering what planet the Chancellor is on. She just said that she is investing in transport infrastructure, but she is actually cutting transport capital budgets. She has previously said that she wants only one Budget a year, and the March statement is billed only as a fiscal forecast. Can she rule out any new tax rises or departmental spending cuts in the March statement, or will the fiscal forecast become an emergency Budget?

[Rachel Reeves]

We have committed to having just one Budget a year to provide businesses with the certainty they need to invest, so we will have an update from the Office for Budget Responsibility in March. I also give the commitment that, as I have already said, the fiscal rules mean we will balance day-to-day spending with tax receipts, and we will get debt down as a share of GDP within the forecast period. We will continue at all times to meet those fiscal rules.

[Tony Vaughan (Folkestone and Hythe) (Lab)]

I congratulate the Chancellor on unlocking £1 billion of value for the UK economy that would not have been unlocked if she had not gone to China. However, does she agree that the Government’s much-needed decision to thaw UK-China relations is now reaping dividends while also allowing us to press China on difficult issues, including human rights and labour standards?

[Rachel Reeves]

My hon. Friend is exactly right. We managed to secure tangible benefits for the UK economy and British exporters. At the same time, we were able to raise difficult issues that we would not have been able to raise if we were not engaged. That is the benefit of engagement: we get the economic gains and we can raise those tricky issues.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

It is beyond parody that His Majesty’s Chancellor would throw herself at the mercy of the Chinese Government and come back with £600 million in revenue over five years. Is she aware that £600 million in revenue is less than one ninetieth of HSBC’s annual profit? This is what she is holding up as a major achievement of the Treasury’s trade mission. My right hon. Friend the Member for Aberdeen South (Stephen Flynn) very reasonably asked what the Chancellor will do when, not if, her fiscal rules are breached. Will she increase borrowing, raise taxes or cut spending, not over five years but this year?

[Rachel Reeves]

I am sure the hon. Gentleman is an expert in HSBC, but I would rather take the word of the chairman of HSBC, who welcomed the tangible investments and, indeed, led the financial forum that we held in China last week. I have been really clear that we will meet the fiscal rules that I set out in the Budget, and we will do that at all times. That is the commitment I made, and it is the commitment I continue to make.

[Deirdre Costigan (Ealing Southall) (Lab)]

Will the Chancellor confirm that, for her, growth must always go hand in hand with economic security? That is a lesson that the previous Conservative Government refused to learn when they left 85% of us dependent on expensive foreign gas to heat our homes this winter.

[Rachel Reeves]

This Government’s clean energy mission will mean that we are less reliant on foreign dictators for our basic energy needs. That is why we are investing in carbon capture and storage and floating offshore wind, and it is why we are getting rid of the previous Government’s absurd ban on onshore wind.

[Harriet Cross (Gordon and Buchan) (Con)]

The Chancellor referred in her statement to safeguarding national security, which I welcome, but this must include energy security. Yet her changes to the energy profits levy, removing investment allowances and not permitting new licences at a time when we are still reliant on oil and gas, not only undermines our energy security but dwarfs the £600 million that she has brought back from China with the £12 billion of tax revenues that will be lost from the sector. Why, rather than supporting our energy security, is the Chancellor turning her back on the sector, turning her back on these tax revenues and risking selling our energy security to China?

[Rachel Reeves]

If the hon. Lady has a brief look at the documents from the Office for Budget Responsibility, she will see that the changes to the energy profits levy—taking the tax rate up from 75% to 78%, the same rate as in Norway—raises money; it does not lose money.

[Linsey Farnsworth (Amber Valley) (Lab)]

I commend the Chancellor for her visit to advocate for our country’s best interests, but does she agree that Chinese companies must not provide any support to Putin’s illegal war in Ukraine?

[Rachel Reeves]

I absolutely agree with my hon. Friend, and I raised such issues with my counterparts in China at the weekend. It is really important that, whenever we engage with foreign Governments, we also raise issues consistent with our values, including Chinese companies supplying the Russian Government with materials used in Russia’s illegal invasion of Ukraine.

[Jim Allister (North Antrim) (TUV)]

Did the Chancellor raise any concerns, or indeed does she have any concerns, about the Confucius Institute, the Chinese Government-backed operation we see across the United Kingdom? And what answer did she get with respect to Jimmy Lai?

[Rachel Reeves]

When our Prime Minister met President Xi Jinping in Rio last year, they agreed that one of the points of re-engagement is that we were able to make clear our concerns on a range of issues in a private way. I am not going to go into the details of that conversation, but I raised these issues with all the Chinese officials I met at the weekend. [Interruption.] The problem is that Conservative Members, for all their chuntering, did not raise these issues because they did not even engage.

[Ben Coleman (Chelsea and Fulham) (Lab)]

My constituents, many of whom work in financial services, will have been amazed, just as I was, when the shadow Chancellor, in a fit of pique, demanded that the Chancellor should come home from China to talk to him in this House, rather than staying to promote growth, increase access to the world’s second largest market and win new licences and quota allocations for financial services businesses. As anybody who has taken the trouble to listen carefully to the Chancellor would recognise, there is more on the way. What does she think the City, and the banks that accompanied her, would have preferred in the long-term interests of this country: stay in China to win for this country, or come home to satisfy the shadow Chancellor’s fit of pique?

[Rachel Reeves]

We just have to look at what the businesses have already said about the deal we managed to secure last week. There are tangible benefits for British businesses exporting to China, helping to create more good jobs paying decent wages here in Britain. It has been welcomed by businesses. It is a shame that the Conservative party no longer stands up for British businesses.

[Dr Ben Spencer (Runnymede and Weybridge) (Con)]

We have an embargo on Russian oil and gas. China continues to import it, and apparently Russia will be China’s No. 1 supplier this year. Did the Chancellor raise this with her counterparts on her trip to China, and what assessment has she made so that her deal does not inadvertently support the Russian war effort?

[Rachel Reeves]

As I have already said in the House today, I raised the issue of Chinese companies supplying the Russian Government. Indeed, the hon. Gentleman will know that last week, alongside the United States, we increased sanctions on Russian oil and gas to make it harder for Putin to continue to conduct his illegal war.

[Chris Vince (Harlow) (Lab/Co-op)]

Will the Chancellor outline how the visit is an example of ongoing dialogue with the international community, which will benefit businesses and residents in my constituency of Harlow? Also, while we are quoting Shakespeare, does she agree that there is something rotten in the state of the Conservative party—or perhaps that the Conservative party is in a rotten state?

[Rachel Reeves]

I am glad that my hon. Friend has used the 50 minutes of the statement to come up with such a good line. He is right that many people working in Harlow work in the financial services sector and will very much welcome the enhanced licences and quotas, which, incidentally, many other countries and their banks already have because their Governments have engaged with China. Those are opportunities that we have missed out on in Britain for far too long because of the six years during which we failed to be involved in an economic and financial dialogue, while other Governments cracked on and made sure they supported and stood up for their national interest.

[Shockat Adam (Leicester South) (Ind)]

Notwithstanding the importance of China as a trading partner, will the Chancellor please explain what steps the Government are taking to address the issues of forced labour links with Uyghur workers in supply chains at fast fashion companies such as Shein? Will the Minister provide data on the extent of forced labour in UK supply chains, especially in the garment sector? Will she also outline any actions to strengthen due diligence requirements for companies sourcing from areas with known human rights abuses, such as Xinjiang?

[Rachel Reeves]

As I have already set out, one of the issues I was able to raise with my counterparts in China was forced labour, particularly in Xinjiang. As I said in answer to the question from the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), I have also been really clear that any company seeking to list in London has to meet stringent requirements, as set out by the United Nations and the OECD, on labour supply and the treatment of workers.

[Madam Deputy Speaker (Judith Cummins)]

For the final question, I call Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

While I welcome the UK-China economic and financial dialogue, as the Chancellor will know, as chair of the all-party parliamentary group for international freedom of religion or belief, I have repeatedly highlighted in this House human rights abuses in China, with regard to Uyghur Muslims, Tibetan Buddhists and Christians in Hong Kong and China. How will the Government and the Chancellor make sure that safeguards for British money and goods are put in place to ensure that economic engagements do not directly support those violations? Human rights concerns, forced labour, denial of religious freedom and ongoing suppression in Xinjiang, Tibet, Hong Kong and Taiwan must be remembered at all costs and in all deals with China.

[Rachel Reeves]

I thank the hon. Gentleman for that thoughtful question. It is important that when we engage with China, we co-operate where we can, we compete where necessary, but we challenge whenever our values do not align. Like the hon. Gentleman, I care deeply about issues of religious freedom and forced labour, but that is the whole point of engaging. We have to engage in the world as it is, not in the world as we would like it to be. It is through those engagements that we are able to raise even some of the most difficult issues and be very clear about the values of our great country.