Rachel Reeves’s trip to China – the first by a British chancellor since 2019 – was always going to be controversial.
In recent years Conservative governments have been keeping Beijing at arm’s length – amid concern about espionage, the situation in Hong Kong, and the treatment of the Uyghurs.
David Cameron‘s so-called “Golden Era” of engagement in the pursuit of economic investment, notoriously capped by a visit to an Oxfordshire pub for a pint with President Xi Jinping – has been widely written off as a naive mistake.
There are many – not least the incoming US President Donald Trump – who believe we should maintain our distance.
But in another era of economic turmoil, the pursuit of growth is the government’s number one priority.
Image: Rachel Reeves visits a Beijing bike shop. Pic: AP
This week’s difficult market news – with the cost of government borrowing surging, and the value of the pound falling – has thoroughly raised the stakes.
Both the Tories and the Lib Dems argued the visit should be cancelled.
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Prominent China hawk and former Conservative leader Iain Duncan Smith MP summed up both arguments against it.
“The trip is pointless,” he wrote on X. “As the disastrous ‘Golden Era’ showed, the murderous, brutal, law-breaking, communist regime in China will not deliver the growth the Labour government craves.
“Instead, she should stay home and try to sort out the awful mess her budget has created.”
Image: President Xi Jinping and David Cameron in 2015. Pic: PA
Yet cancelling the trip would have been a diplomatic disaster and far from adding to economic stability would surely have spread a sense of crisis (with inevitable comparisons to Denis Healey’s abandoned visit to Hong Kong in 1976, months before he was forced to apply from an emergency loan from the IMF to save the pound from collapse).
Instead, the government argues the current market situation is a result of “global trends”, and Reeves insists she will be sticking to the decisions taken in the budget.
“Growth is the number one mission of this government. The fiscal rules laid out in the budget are non-negotiable. Economic stability is the bedrock for economic growth and prosperity.”
Improving the UK/China relationship should “boost our economic growth for the benefit of working people in both of our countries” she said during her meeting with vice premier He Lifeng.
In a speech to media afterwards, Reeves was delighted to announce a big, concrete number to justify the value of the trip, claiming the agreements reached would be worth £600m to the UK economy over five years.
Pragmatism is the new order of the day. Labour argues re-establishing “pragmatic engagement” with China is in the national interest, and it’s a word Reeves used four times in five minutes during her speech.
The government insists this new closer relationship will make it easier for them to raise tricky issues and we did hear the chancellor flagging concerns about Hong Kong and the role of China in connection with Russia’s war in Ukraine – though not the Uyghurs, or the imprisoned British citizen and pro-democracy activist Jimmy Lai.
The challenge going forward will be to show that cosying up to China is worth it.
There’s a lot riding on it for the chancellor – with questions being openly asked about her economic strategy given the growing likelihood that to meet her fiscal rules on balancing tax and spending she will be forced to make deep cuts to government departments this spring.
We are promised a big speech from the chancellor on the government’s plans for growth in the coming weeks.
In many ways, the trip to China may have been a welcome break from the difficult decisions which await her return.
Research into faster drug treatments and longer-lasting batteries will form part of the £86bn science and technology funding due to be unveiled in the government’s spending review next week.
On Wednesday, Chancellor Rachel Reeves will unveil how much taxpayer money each government department will get.
Each region in England will be handed up to £500m to spend on science and technology projects of their choice, the Department for Science, Innovation and Technology (DSIT) says.
In Liverpool, the funding is being earmarked to speed up the development of new drug treatments, while in South Wales, it will fund longer-lasting microchips for smartphones and electric cars.
“Britain is the home of science and technology,” she said on Sunday. “Through the ‘plan for change’, we are investing in Britain’s renewal to create jobs, protect our security against foreign threats and make working families better off.”
Science and technology secretary Peter Kyle added: “Incredible and ambitious research goes on in every corner of our country, from Liverpool to Inverness, Swansea to Belfast, which is why empowering regions to harness local expertise and skills for all of our benefit is at the heart of this new funding – helping to deliver the economic growth at the centre of our plan for change.”
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Can AI predict spending review, asks Sky deputy political editor Sam Coates
Flat real-terms budget ‘won’t be enough’
Regional leaders such as North East Mayor Kim McGuiness and West Midlands Mayor Richard Parker welcomed the funding promise.
But the announcement was met with caution by industry leaders.
John-Arne Rottingden, chief executive of Wellcome, the UK’s biggest non-governmental research funder, said: “While it’s positive under the financial circumstances, a flat real-terms science budget, along with continuing barriers such as high visa costs for talented scientists and the university funding crisis, won’t be enough for the UK to make the advances it needs to secure its reputation for science in an increasingly competitive world.”
He claimed the UK should be “aiming to lead the G7 in research intensity” to “bring about economic growth” and “advances in health, science, and technology that benefit us all”.
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Director of policy and public affairs at the Institute of Physics Tony McBride expressed similar concerns.
“To fully harness the transformational potential of research and innovation – wherever it takes place – we need a decade-long strategic plan for science,” he said.
Mr McBride said a “plan for a skilled workforce… starting with teachers and addressing every educational stage” is key – something he hopes will feature in Ms Reeve’s spending review.
Among the other announcements expected are a potential scrapping of the two-child benefit cap and a green light to a new nuclear power station in Suffolk – Sizewell C.
Reform UK chairman Zia Yusuf has reversed his decision to quit the party, saying “the mission is too important” and that he “cannot let people down”.
Instead, he said he will return in a new role, heading up an Elon Musk-inspired “UK DOGE” team.
In a statement, he said: “Over the last 24 hours I have received a huge number of lovely and heartfelt messages from people who have expressed their dismay at my resignation, urging me to reconsider.”
He added: “I know the mission is too important and I cannot let people down.
“So, I will be continuing my work with Reform, my commitment redoubled.”
Mr Yusuf said he would be returning in a new role, seemingly focusing on cuts and efficiency within government.
He said he would “fight for taxpayers”.
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Mr Yusuf’s initial decision to quit came after he publicly distanced himself from the party’s new MP, Sarah Pochin, when she asked Sir Keir Starmer about banning the burka at Prime Minister’s Questions.
Reform said a ban was not party policy – and the chairman called it a “dumb” thing to ask.
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DOGE is a meme-coin inspired creation of Musk’s, standing for the Department of Government Efficiency.
It is the latest right-wing US import into British politics.
Before his public fallout with Donald Trump, the tech billionaire said his focus was saving taxpayers’ money by locating wasteful spending within government and cutting it.
However, opposition politicians questioned the impact of his efforts and how much he actually saved.
Musk initially had ambitions to slash government spending by $2trn (£1.5trn) – but this was dramatically reduced to $1trn (£750bn) and then to just $150bn (£111bn).