The health secretary has said that the cabinet is aware of the “pressure” on Chancellor Rachel Reeves amid volatile markets and a challenging broader economic picture – but appealed for the public to “give her time”.

Wes Streeting argued that the public “underestimates” the “amount of heavy-lifting” Ms Reeves has had to do and will have to continue to do, as he declared “total confidence” in her leadership in a staunch defence of her handling of the economy.

Separately, international development minister Anneliese Dodds, who attends cabinet, told Sky News that Ms Reeves has been “very clear about the long-term plan for our country” and she herself is “confident in that long-term plan”.

The comments from the two key ministers come after the past week saw a drop in the pound and an increase in government borrowing costs, which has fuelled speculation of more spending cuts or tax rises.

Streeting has ‘total confidence in chancellor’s leadership’

Speaking at the Jewish Labour Movement’s annual conference in north London, the health secretary acknowledged the fierce competition among all government departments for any available public funding from the Treasury, and told party members that all ministers “have to make choices and trade-offs” in where funding goes.

Mr Streeting went on to say that the chancellor and her deputy, Darren Jones, have “the hardest job of all because they have to make those choices across every bit of government spending, and they have to think about what’s in the interests of our overall economy and how we get businesses growing”.

He said: “I think people continue to underestimate both the amount of heavy lifting she has had to do in her first six months, and the amount of heavy lifting she will have to do in her next six months.

“And the cabinet doesn’t underestimate that – we understand the choices she has to make, the pressure she is under.”

As a result, cabinet ministers all “have a responsibility” to both “make tough choices and drive reform and value for money” within their departments, and also be “drivers of economic growth”.

“Nothing in the last six months has shaken my conviction that economic growth is the number one priority,” he said.

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Continuing his defence of the chancellor’s handling of the economy so far, Mr Streeting said she is “trying to break us out of what has been the status quo and the economic orthodoxy of more than a decade”.

“People need to give her time, and they need to not forget that, without [Sir Keir Starmer’s] leadership, certainly we wouldn’t have won the last general election.

“Without Rachel’s leadership, we wouldn’t have won the last general election either. She built Labour’s economic credibility out of the ashes they were left in after the Corbyn leadership. And she has built that trust, built up that plan, and now she’s following through.”

He declared that he has “total confidence in the leadership that Rachel’s providing, and the leadership that the cabinet is following and driving with her, because all of us have to deliver economic growth for our country”.

Minister ‘confident in chancellor’s long-term plan’

Speaking in a separate session at the conference, Ms Dodds noted “speculation” about the fiscal headroom (the amount of money the chancellor will have available to spend), but said: “We have to focus on actually the evidence.

“And when we look at the evidence, we can see that the UK government has a chancellor who is very clear about the long-term plan for our country. She’s been delivering on it.”

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Ms Dodds, who also attends cabinet, pointed to a “new fiscal system”, the chancellor’s new Industrial Strategy Council, as well as “record levels of investment under Rachel Reeves’s leadership”.

“I think it’s really important for us to focus on those fundamentals, on what has been achieved in a very short space of time. And I’m confident in that long-term plan that Rachel has been setting out.

“And we can already see the benefit of that, frankly, in terms of the UK’s reputation when it comes to public finances, but economic management more generally. Certainly that’s what I’ve heard internationally and keep hearing just now.”

Chancellor accused of having ‘fled to China’

The pair were speaking as the chancellor holds meetings in China in a bid to drum up investment for the UK economy, having ignored calls to cancel the long-planned trip because of economic turmoil at home.

Opposition parties have accused the chancellor of having “fled to China” rather than explain how she will fix the UK’s flatlining economy, and former prime minister Boris Johnson said Ms Reeves had “been rumbled” and said she should “make her way to HR and collect her P45 – or stay in China”.

Speaking during her trip, Ms Reeves said she would not alter her economic plans, with the October budget designed to return the UK to economic stability, and reiterated that “growth is the number one mission of this government”.

She said that “action” will be taken to meet the fiscal rules. That action is reported to include deeper spending cuts than the 5% efficiency savings already expected to be announced later this year, while cuts to the welfare bill are also said to be under consideration.

Making Britain better off will be “at the forefront of the chancellor’s mind” during her visit to China, the Treasury has said amid controversy over the trip.

Rachel Reeves flew out on Friday after ignoring calls from opposition parties to cancel the long-planned venture because of market turmoil at home.

The past week has seen a drop in the pound and an increase in government borrowing costs, which has fuelled speculation of more spending cuts or tax rises.

The Tories have accused the chancellor of having “fled to China” rather than explain how she will fix the UK’s flatlining economy, while the Liberal Democrats say she should stay in Britain and announce a “plan B” to address market volatility.

However, Ms Reeves has rejected calls to cancel the visit, writing in The Times on Friday night that choosing not to engage with China is “no choice at all”.

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The chancellor will be accompanied by Bank of England governor Andrew Bailey and other senior executives.

She will meet with her counterpart, Vice Premier He Lifeng, in Beijing on Saturday to discuss financial services, trade and investment.

She will also “raise difficult issues”, including Chinese firms supporting Russia’s invasion of Ukraine and concerns over constraints on rights and freedoms in Hong Kong, the Treasury said.

But it did not mention whether Ms Reeves would raise the treatment of the Uyghur community, which Downing Street said Foreign Secretary David Lammy would do during his visit last year.

On Friday, Culture Secretary Lisa Nandy defended the trip, telling Sky News that the climbing cost of government borrowing was a “global trend” that had affected many countries, “most notably the United States”.

“We are still on track to be the fastest growing economy, according to the OECD [Organisation for Economic Co-operation and Development] in Europe,” she told Anna Jones on Sky News Breakfast.

“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.”

Read more – Ed Conway analysis: The chancellor’s gamble with China

However, former prime minister Boris Johnson said Ms Reeves had “been rumbled” and said she should “make her way to HR and collect her P45 – or stay in China”.

While in the country’s capital, Ms Reeves will also visit British bike brand Brompton’s flagship store, which relies heavily on exports to China, before heading to Shanghai for talks with representatives across British and Chinese businesses.

It is the first UK-China Economic and Financial Dialogue (EFD) since 2019, building on the Labour government’s plan for a “pragmatic” policy with the world’s second-largest economy.

Sir Keir Starmer was the first British prime minister to meet with China’s President Xi Jinping in six years at the G20 summit in Brazil last autumn.

Relations between the UK and China have become strained over the last decade as the Conservative government spoke out against human rights abuses and concerns grew over national security risks.

Navigating this has proved tricky given China is the UK’s fourth largest single trading partner, with a trade relationship worth almost £113bn and exports to China supporting over 455,000 jobs in the UK in 2020, according to the government.

During the Tories’ 14 years in office, the approach varied dramatically from the “golden era” under David Cameron to hawkish aggression under Liz Truss, while Rishi Sunak vowed to be “robust” but resisted pressure from his own party to brand China a threat.

The Treasury said a stable relationship with China would support economic growth and that “making working people across Britain secure and better off is at the forefront of the chancellor’s mind”.

Ahead of her visit, Ms Reeves said: “By finding common ground on trade and investment, while being candid about our differences and upholding national security as the first duty of this government, we can build a long-term economic relationship with China that works in the national interest.”

As the dust settles on a tumultuous week for gilts (UK government bonds) and sterling – a week that has raised serious questions about chancellor Rachel Reeves’s stewardship of the economy – the big question many people will be asking is why investor sentiment has shifted so much against the UK in the past week.

Following on from that is what Ms Reeves should try to do about it.

The first point to make – and indeed it is one the government has been making – is that there has been a broad sell-off in government bonds around the world this week. Yields, which go up as the price of a bond falls, have been rising not only in the case of gilts but also on bonds issued by the likes of the US, Japan, France and Germany.

That reflects the fact that investors are changing their assumptions about the path of inflation this year and, in turn, how central banks like the US Federal Reserve, the European Central Bank and the Bank of England respond.

Money latest: Pound hit steadies as chancellor considers spending cuts

Inflation is now expected to be stickier around the world due to a combination of factors, of which by far the biggest is the tariffs the incoming Trump administration is expected to introduce. Those tariffs will push up the price of goods bought by American consumers and, if America’s trading partners respond with tariffs of their own, for consumers elsewhere. US Treasuries have also been under pressure due to expectations that Mr Trump will raise US borrowing sharply.

That said, gilt yields have been rising by more than yields on their international counterparts, reflecting the fact that investors think the UK has specific issues with inflation. The increase in employer’s national insurance contributions (NICs) announced by Ms Reeves in her Halloween budget will be highly inflationary because they will push up the cost of employing people.

The chief executives of some of the UK’s biggest retailers – Lord Wolfson at Next, Ken Murphy at Tesco, Stuart Machin at Marks & Spencer and Simon Roberts at Sainsbury’s – this week repeated their warnings that these higher costs will feed through to higher prices.

Another reason why gilt yields have risen more than those of their international counterparts is the UK’s particular fiscal position and its poor growth prospects.

Yes, other countries have as poor prospects for growth as the UK or as bad a debt situation. The US national debt, for example, is 123% of US GDP while Japan has a debt to GDP ratio of 250%. The UK, with a debt to GDP ratio of just under 99%, doesn’t look so bad by comparison. However, as the market in US Treasuries is the biggest and most liquid in the world and the US dollar is the global reserve currency, investors seldom have hesitation about lending to the US government. Similarly, in the case of Japan, most of its government debt is owned by Japanese savers – encapsulated by the mythical figure of ‘Mrs Watanabe’.

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The UK does not have that luxury and, accordingly, has to rely on what Mark Carney, the former governor of the Bank of England, memorably described in a 2017 speech as “the kindness of strangers” to fund its borrowing (he was talking on that occasion about the UK’s current account deficit rather than its fiscal deficit, but the point holds).

In summary, then, investors are demanding a higher premium for the added risk of holding gilts. That perceived risk – as the former prime minister Liz Truss has gleefully been pointing out – means that yields on some gilts are now even higher than they spiked following her chancellor Kwasi Kwarteng’s ill-fated mini budget in September 2022.

Investors are also sceptical about the UK economy’s ability to grow its way out of this predicament. While the government’s proposals to invest in infrastructure have been welcomed by investors, they have also noted that much of the extra borrowing being taken on by Ms Reeves in her budget was to fund big pay rises for public sector workers, which – rightly or wrongly – are not perceived to be as good a use of government money as, say, investing in improvements to roads or power grids.

So what does Ms Reeves do?

Well, as the old joke about the Irishman guiding a lost tourist puts it, she “wouldn’t start from here”. The chancellor’s big mistake was to box herself in during the general election campaign by ruling out increases in income tax, employees’ national insurance, VAT or corporation tax. She could easily, for example, have promised to unwind her predecessor Jeremy Hunt’s cut in employee’s national insurance – which was rightly recognised by most voters as a pre-election bribe.

Still, she is where she is, so the chancellor’s main job now will be to convince investors that the UK is on a stable fiscal footing. With the recent rise in gilt yields – the implied government borrowing cost – threatening to eliminate the chancellor’s headroom to meet her fiscal rules, that is likely to mean public sector spending cuts or higher taxes. The former option is more likely than the latter and not least because Ms Reeves is committed to just one ‘fiscal event’ – when taxes are raised – per year and that will be her budget this autumn.

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The Bank of England is also going to have a big part to play here in reinforcing to markets its determination to bringing inflation down to its target range – which means borrowers should not expect as many interest rate cuts in 2025 as they were, say, six months ago.

The Bank may also slow the pace at which it is selling its own gilt holdings (accumulated largely during the ‘quantitative easing’ on which it embarked after the global financial crisis) which would also ease the downward pressure on gilts.

Also coming to the chancellor’s aid, in all likelihood, will be a weakening in the pound which should, all other things being equal, help make gilts more appetising to international investors.

All of this underlines though, unfortunately, that there is only so much the chancellor can do.