Exclusive:Chancellor Rachel Reeves does not have a mandate for austerity, says Kate Forbes

The deputy first minister says Chancellor Rachel Reeves needs to be straight with the public, amid concerns about market uncertainty

Kate Forbes has said the SNP is watching “very, very carefully” how Chancellor Rachel Reeves responds to economic uncertainty and warned the UK government does not have a mandate for austerity.

The Deputy First Minister told The Scotsman the economy is “never a bubble issue” as the decisions Ms Reeves makes will have real-life consequences for people across the country.

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She added that if she was Chancellor she “would be straight with the public”, accusing the Labour Party of not being transparent over their spending plans during last year’s general election campaign.

Deputy First Minister Kate ForbesDeputy First Minister Kate Forbes
Deputy First Minister Kate Forbes | Lisa Ferguson

Ms Reeves has vowed to go "further and faster" to improve economic growth after market turbulence saw the cost of servicing UK debt rise to their highest level for several years.

In a further blow for Sir Keir Starmer’s Treasury team, Tulip Siddiq quit as City minister on Tuesday after an investigation by ministerial standards watchdog into her links to her aunt’s political movement in Bangladesh.

Ms Siddiq’s aunt is the former Bangladeshi prime minister Sheikh Hasina, who fled into exile after being deposed last year and is facing an investigation by an anti-corruption commission in Bangladesh, with the Labour MP reportedly named as part of the case.

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Ms Siddiq – who as City minister had responsibility for tackling financial corruption – has also come under intense scrutiny over her use of properties in London linked to her aunt’s allies.

Ms Forbes told The Scotsman: “Economic matters are never a bubble issue. Rachel Reeves is not a bubble issue, because right now there are pensioners in the grips of a cold winter unable to benefit from winter fuel payments.

“The question right now is how she will respond to the market uncertainty - we are watching very, very carefully.”

When pressed on whether she thinks the Chancellor should resign, Ms Forbes said: “We are all watching very carefully on how she will respond to the market uncertainty.”

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Ms Forbes conceded the economy has “gone through a tumultuous time” in recent days, but says there is still a question mark over the UK budget.

She said the Labour Party did not get a mandate from the public to make some of the spending decisions they have, such as increasing employer National Insurance contributions and cutting universal winter fuel payments for pensioners.

The Deputy First Minister said: “Where you have a government that has a mandate because a policy change was front and centre of their manifesto and people voted for them on that basis, you could understand it to an extent.

“But the only party that wasn’t straight with the public at the most recent election was Labour.

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“[Scottish Labour leader] Anas Sarwar said ‘read my lips, no austerity under Labour’, but earlier today Rachel Reeves couldn’t confirm to [SNP Westminster leader] Stephen Flynn there wouldn’t be more spending cuts.”

Ms Forbes is currently the Scottish economy secretary and under Nicola Sturgeon served as finance secretary.

She said: “John Swinney was straight with the public - there’s no doubt where he stood on the difficulty in our public finances.

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“The economists are rarely unanimous, but they were all in the same place saying there was a huge gaping hole in the UK finances and that the Labour Party needed to be straight with what to do to fix it.

“Instead the Labour Party dismissed that and campaigned on the basis of one word - ‘change’.

“The first thing I would do in her shoes is make sure I have a mandate for the changes I want to introduce.

“The second thing would be to be clear that we need to invest to get ourselves out of these difficulties.

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“What we need now is a plan from the government on how to invest in our public sector.

“Even more than that the economic drivers for change will be investing in people and skills, recognising the huge opportunities in Scotland around renewables and manufacturing.

“And one of the biggest challenges people have is accessing a workforce, so there are implications for relaxing immigration rather than tightening it.”

The Chancellor came under pressure in the House of Commons on Tuesday after the cost of government borrowing increased and the value of the pound fell while she was on an overseas trip to China.

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Ms Reeves defended her position, saying the current turbulence in the financial markets underlines the need to go “further and faster” in search of economic growth.

She said: “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 that we face are a reminder that we should - indeed, we must - go further and faster in our plan to kickstart economic growth.”

SNP MP Dave Doogan said it was “beyond parody” that Ms Reeves would “go and throw herself at the mercy of the Chinese government, and come back with £600 million”.

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Ms Reeves defended her trip to China by saying agreements had been reached in Beijing and Shanghai where she held discussions on trade and investments, which would be worth £600m to the UK over the next five years.

Mr Doogan said: “When, not if, when her fiscal rules are breached, which will she do - increase borrowing, raise taxes, or cut spending?”

Ms Reeves replied: “I’ve been really clear, we will meet our fiscal rules that I set out in the budget, and we will do that at all times.”

The Chancellor restated her commitment to her fiscal rules, which include meeting day-to-day spending through tax revenues.

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But rising borrowing costs eat into the money available for public services, leaving Ms Reeves faced with either slashing spending or hiking taxes again, something she has pledged not to do.

Asked if she would rule out spending cuts, she told MPs: “I’m not going to write five years worth of budgets in the first six months of a Labour Government.”

The government’s hope is that the economy will revive, with extra activity leading to higher tax revenues.

The Office for Budget Responsibility’s next set of forecasts will be published in March, which could force action by Ms Reeves if it appears she is set to break her rules – which are aimed at reassuring the markets that the government can keep the nation’s finances under control.

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The pound, which had risen early on Tuesday, later dipped back below 1.22 US dollars, hovering close to 14-month lows as government borrowing costs continued to come under pressure.

Yields on government bonds, also known as gilts, gave up a tentative recovery, edging back up to the multi-decade highs hit in recent days.

The 10-year gilt yield edged up to 4.9 per cent and while 30-year long-dated gilts held firm at around 5.4 per cent.

Yields are a key indicator of market confidence, moving inversely to bond prices.

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They rise when investors are less willing to own the debt, meaning they will pay a lower price for the bonds.

On Monday Prime Minister Sir Keir Starmer told journalists Ms Reeves will remain his Chancellor until the next general election, but warned she would need to be “ruthless” on public spending cuts.

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