Britain will not lower its standards or water down regulation in exchange for a trade deal with the US, the chancellor has confirmed.

Rachel Reeves was speaking ahead of a pivotal meeting with her American counterpart in Washington DC.

In an interview with Sky News, Ms Reeves said she was “confident” that a deal would be reached but said she had red lines on food and car standards, adding that changes to online safety were “non-negotiable for the British government”.

The comments mark the firmest commitment to a slew of rules and regulations that have long been a gripe for the Americans.

Money blog: Private UK island loved by Rihanna and Stormzy for sale

The US administration is pushing for the UK to relax rules on agricultural exports, including hormone-treated beef.

While Britain could lower tariffs on some agricultural products that meet regulations, ministers have been clear that it will not lower its standards.

However, the government has been less firm with its stance on online safety.

A tech red line

The US tech industry has fiercely opposed Britain’s Online Safety Act, which was introduced in 2023 and requires tech companies to shield children from harmful content online.

In an earlier draft UK-US trade deal, the British government was considering a review of the bill in the hope of swerving US tariffs.

However, the chancellor suggested that this was no longer on the table.

“On food standards, we’ve always been really clear that we’re not going to be watering down standards in the UK and similarly, we’ve just passed the Online Safety Act and the safety, particularly of our children, is non-negotiable for the British government,” she said.

She added that Britain was “not going to water down areas of road safety”, a move that could pave the way for American SUVs that have been engineered to protect passengers but not pedestrians.

While non-tariff barriers will remain intact, it was reported on Tuesday night that the UK could lower its automotive tariff from 10% to 2.5%.

The calculations behind Reeves’s red lines

Gurpreet Narwan

Business and economics correspondent

@gurpreetnarwan

What can Britain offer the Americans if it’s not prepared to lower its standards?

Donald Trump has previously described non-tariff barriers that block US exporters as “cheating”.

Britain does have some scope to bring down tariff rates – and Rachel Reeves suggested that this was her focus – but ours is already a highly open economy, we don’t have huge scope to cut tariff rates.

The real prize for the Americans is in the realm of these non-tariff barriers.

There has been much speculation about what the UK could offer up, but the chancellor on Wednesday gave a comprehensive commitment that she would not dilute standards.

There are many who will breathe a collective sigh of relief – from UK farmers to road safety campaigners and parents of young children.

While the government is sensitive to any potential public backlash, it also has another factor to think about.

When Ms Reeves arrives back home, she will begin preparations for a UK-EU summit in London next month.

The UK’s food and road safety standards are, in many areas, in sync with Europe, and Britain is seeking even deeper integration.

Lowering standards for the Americans would make that deeper alignment with the Europeans impossible.

The chancellor has to decide which market is more valuable to Britain.

The answer is Europe.

Back at home, the chancellor suggested that she was still open to relaxing rules on the City of London, even though global financial markets have endured a period of turmoil, triggered by President Trump’s trade war.

Reforms at home?

In her Mansion House speech last November, the chancellor said post-2008 reforms had “gone too far” and set the course for deregulating the City.

Asked if that was a wise move in light of the recent sharp swings in the financial markets, Ms Reeves said: “I want regulators to regulate not just for risk but also for growth.

“We are making reforms and we have set out new remit letters to our financial services regulators.”

Britain’s borrowing costs hit their highest level in almost 30 years after Mr Trump’s Liberation Day tariffs announcements, a stark reminder that policy decisions in the US have the power to raise UK bond yields and in turn, affect the chancellor’s budget, dent her already small fiscal headroom and derail her plans for tax and spend.

However, the chancellor said she would not consider adapting her fiscal rules, which include a promise to cover day-to-day spending with tax receipts, even if it gives her more room to manoeuvre in the face of volatility.

“Fiscal rules are non-negotiable for a simple reason, that Britain must offer under this government fiscal and financial stability, which is so important in a world of global uncertainty,” she said.

The UK government borrowed almost £15bn more than forecast in the last financial year, according to official figures highlighting contributions from inflation-related costs including pay awards.

The Office for National Statistics (ONS) reported that borrowing – the difference between total public sector spending and income – over the 12 months to the end of March came in at £151.9bn.

That provisional sum was £20.7bn more than in the same twelve-month period a year earlier and £14.6bn more than the £137.3bn forecast by the Office for Budget Responsibility (OBR) at the spring statement just a month ago, the body said.

Money latest: Are Treasury-backed savings now the best place for your cash?

It added that the figure represented 5.3% of the UK’s gross domestic product (GDP), 0.5 percentage points more than in 2023/24.

It was partly driven by £16.4bn of borrowing in March – the third-highest March borrowing since monthly records began in 1993.

The provisional data left public sector net debt at 95.8% of GDP at the end of March. That is 0.2 percentage points higher than at the end of March 2024 and remaining at levels last seen in the early 1960s.

Higher borrowing is partly a consequence of government investment and spending decisions announced in the chancellor’s autumn budget last year.

But it is also a result of higher costs to service government debt, with the ONS data showing a bill of £4.3bn for March alone.

Elevated bond yields, which reflect a higher risk premium demanded by investors in return for holding UK government debt, are a result of greater turmoil in the global economy and unease over domestically-generated inflation and weak growth at a time of continued strain for the public purse.

Rachel Reeves was forced to use her spring statement in March to restore a £10bn buffer to the public finances to avoid breaking her own fiscal rules.

ONS chief economist Grant Fitzner said of the data: “Our initial estimates suggest public sector borrowing rose almost £21bn in the financial year just ended as, despite a substantial boost in income, expenditure rose by more, largely due to inflation-related costs, including higher pay and benefit increases.

“At the end of the financial year, debt remained close to the annual value of the output of the economy, at levels last seen in the early 1960s.”

The government’s efforts to bring down costs include a crackdown on the welfare bill and a renewed focus on securing growth in the economy.

However, business groups say the chancellor’s decision to impose an additional tax burden on employment from this month, mainly through higher minimum wage and employer national insurance contributions, will backfire and harm both employment and investment.

Household spending power is also set to face further strain as inflation is tipped to rise beyond 3% due to a slew of rising costs in the economy, including bills for energy and water.

Read more from Sky News:
Stock markets rally as Trump rows back on Fed and China threats
Musk says his time working for Trump to ‘drop significantly’

The impact of the US trade war is also starting to be felt.

A closely-watched index of activity in the service and manufacturing sectors fell into negative territory with its weakest reading since November 2022.

The survey of purchasing managers by S&P Global found export orders falling at their fastest pace since early 2020.

AJ Bell head of financial analysis, Danni Hewson, said of the data: “Many of the challenges facing the UK economy are beyond the chancellor’s control and she is currently in Washington trying to strike a deal with the US administration on tariffs that will cushion the UK without selling off the family silver.

“One of the big questions is how those changes to employer National Insurance will impact next month’s numbers, especially with inflation linked benefits and the state pension rising at the same time.

“Many people will now be eyeing that headroom created back in March which had always seemed rather insubstantial, and wondering how much will be left by the autumn.”

Responding to the figures, Chief Secretary to the Treasury Darren Jones said the government would always be responsible when it came to the public finances.

He added: “We are laser-focused on making sure taxpayer money is delivering our Plan for Change missions to put more money in people’s pockets, rebuild the NHS and strengthen our borders.”

But shadow chancellor Mel Stride said: “By fiddling the fiscal rules, increasing borrowing by £30bn a year and piling up debt – these figures are alarming but not surprising.”

Elon Musk has said the time he spends with Donald Trump’s Department of Government Efficiency (DOGE) will “drop significantly” from May and he will allocate more time to Tesla.

It comes after first-quarter profits at Tesla sank as the company grapples with falling sales, partly due to President Trump’s tariffs.

As a special government employee, Mr Musk was limited to 130 days in his role at DOGE, which is primarily aimed at slashing federal spending.

But the cuts, which included axing government jobs, have divided the country and prompted a backlash against his company, including protests and attacks on Tesla showrooms, prompting Donald Trump to label the vandals “terrorists”.

Tesla said on Tuesday that quarterly profits fell by 71% to $409m (£306.77m) from $1.39bn (£1.04bn) in the first quarter of 2024. Revenues were also well below forecasts, dropping 9% to $19.3bn (£14.5bn) between January and March.

The company’s value has plummeted since reaching a record high in mid-December. Since then, Tesla’s share price has fallen more than 50%.

Tesla’s share price has tumbled following the financial market turbulence caused by the global trade war tariffs, competition from Chinese EV rivals and concern over Mr Musk’s ability to give the firm the attention it requires.

Mr Musk’s role as chief executive of the company was among the most common questions shareholders were asking about in a question-and-answer portal ahead of an investor call on Tuesday evening.

As well as his role at the top of Tesla, he is also the CEO of space exploration company SpaceX and owns social media company X, formerly known as Twitter.

Musk has ‘lost focus’

An early Tesla investor Ross Gerber said in a recent interview with Sky’s Business Live that Mr Musk had lost his focus and was now too “divisive”.

There has been no clear sign of improvement at Tesla as much-awaited updates on making affordable cars and developing driverless technology left some questions unanswered.

Work on an affordable car remained “on track for start of production in the first half of 2025”, Tesla’s financial results said, but no details on a prototype were given.

Production of Tesla’s self-driving robotaxi, named Cybercab, is scheduled to start in 2026.

Tariffs harming outlook

Uncertainty was also evident in the outlook statement, which pointed to the harm tariffs could pose to the business.

“It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure and demand for durable goods and related services,”

“The rate of growth this year will depend on a variety of factors, including the rate of acceleration of our autonomy efforts, production ramp at our factories and the broader macroeconomic environment”.

While Teslas are made in the US, there are also factories in China and Germany. Under the tariff regime, those car parts are subject to additional taxes when they enter America.