UK finance minister Reeves: We remain committed to fiscal rules

By Sachin Ravikumar and Sam Tabahriti

LONDON (Reuters) - British finance minister Rachel Reeves, facing criticism for her management of the economy after a sharp increase in the cost of government borrowing, said on Tuesday that she would stick to her fiscal rules at all times.

Reeves was speaking in parliament, where opposition Conservatives attacked her decision to travel to China at the weekend as government bond yields soared, something that could make it harder to meet her rules on future tax and spending.

"We remain committed to those fiscal rules and we will meet them at all times," Reeves said.

Britain has been hit hard by a global surge in bond yields, reflecting inflation worries at home and in the United States, reduced chances of a drop in interest rates, and uncertainty over how U.S. President-elect Donald Trump will conduct economic policy.

Investors are also watching to see how businesses are reacting to a sharp increase in payroll taxes imposed in Reeves' Oct. 30 budget, which represents another uncertainty hanging over Britain's economy.

Reeves' fiscal rules include a stability rule, whereby day-to-day spending must be matched by revenues, and an investment rule that public sector net financial liabilities will decline as a proportion of gross domestic product (GDP).

Reeves told parliament that she would give a speech on the economy soon. Asked to rule out spending cuts in response to the market moves, she reiterated her commitment to meeting the fiscal rules.

"The economic headwinds that we face are a reminder that we should, indeed we must, go further and faster in our plan to kick-start economic growth that plunged under the last government."

The rise in British government borrowing costs prompted some comparisons with the 2022 "mini-budget" crisis that forced then-Prime Minister Liz Truss out of Downing Street.

However, market moves have been far less sharp and there has so far been no evidence of the strain on institutional investors that forced the Bank of England into emergency bond purchases in 2022.

The gilt market looked flat on Tuesday, following six consecutive days of rising yields, or falling prices.

(Reporting by Sachin Ravikumar and Sam Tabhriti, writing by William James and Andy Bruce; editing by Catarina Demony)