rachel reeves has flown to china, but the turbulence is all back here, in uk financial markets, so why is she there? we'll ask a man who moved billions in the bond markets. and half the local councils in england say they must delay their elections in may. reform party leader nigel farage tells us, "they're spoiling our ballot papers". good evening. this is newsnight, live from broadcasting house, with the best insights and interviews. that is a live shot. it's the most political sofa in the land. labour mp chris curtis. anne mcelvoy, politico podcast panjandrum.

which is quite hard to say. and ems barr, former conservative advisor, who has now switched to reform — whose leader, nigel farage, is also lined up, arguing a shake—up of local government is no reason to delay elections to them. thank you all for coming. first, rachel reeves is in china, heading east, while the value of the pound went south. meanwhile, uk borrowing costs nudge historic highs. let's speak to mohamed el—erian, former deputy director of the international monetary fund, who was investment manager at the bond market behomoth pimco. welcome to newsnight. thanks for havin: welcome to newsnight. thanks for having me- — welcome to newsnight. thanks for having me- is _ welcome to newsnight. thanks for having me. is rachel— welcome to newsnight. thanks for having me. is rachel reeves - welcome to newsnight. thanks for having me. is rachel reeves in - welcome to newsnight. thanks fori having me. is rachel reeves in the right place geographically?- having me. is rachel reeves in the right place geographically? look, it is hard because _ right place geographically? look, it is hard because had _ right place geographically? look, it is hard because had she _ right place geographically? look, it is hard because had she cancelled i is hard because had she cancelled her trip, is hard because had she cancelled hertrip, people is hard because had she cancelled her trip, people would have said she's panicking and the situation must be much worse. so she was in a lose lose and if i had been her, i would have cancelled the trip, but i understand why she decided to keep it. is understand why she decided to keep it. , , it. is she in the right place economically? _ it. is she in the right place economically? she - it. is she in the right place economically? she is -

it. is she in the right place economically? she is in i it. is she in the right place economically? she is in a| it. is she in the right place - economically? she is in a very tough place economically. _ economically? she is in a very tough place economically. because - economically? she is in a very tough place economically. because she - economically? she is in a very tough | place economically. because she has lost her fiscal headroom. higher yields mean that the government pays more in terms of interest costs, which means less money available for other things. which means less money available for otherthings. she which means less money available for other things. she is also in the wrong place because a lower currency, a weaker currency currency, a weaker currency means high currency, a weaker currency means high inflationary pressure and all this undermines growth. so the three things she really cares about face significant headwinds right now because of something that started in the us. , �* , because of something that started in the us. , �*, ., ~ ., ., the us. yes, let's talk about that. so this is something _ the us. yes, let's talk about that. so this is something that -- - the us. yes, let's talk about that. so this is something that -- this | the us. yes, let's talk about that. | so this is something that -- this is so this is something that —— this is something different from the liz truss mauling by yourformer colleagues in the bond market because that was said to be uk specific and now those same people are anti—debt all over the world and they don't like anyone's debt. it is not likely don't _ they don't like anyone's debt. it 3 not likely don't like anybody's not likely don't like anybody�*s debt, they are reacting to three things. —— it is not that they don't like. one is higher growth in the us

and that pushes up yields and that is good reason for higher yield. less good is the second reason mystic inflation. inflation is not coming down as most people expected. —— the second reason is rising inflation. in the third is debt and deficits. the us is a situation that if the bond market costs over there, we catch cold in the uk. [30 if the bond market costs over there, we catch cold in the uk.— we catch cold in the uk. do we have any reasons — we catch cold in the uk. do we have any reasons and _ we catch cold in the uk. do we have any reasons and are _ we catch cold in the uk. do we have any reasons and are we _ we catch cold in the uk. do we have any reasons and are we prone - we catch cold in the uk. do we have any reasons and are we prone to - any reasons and are we prone to colds? i noticed one of the lowest debt rates you can buy switzerland. so we're not switzerland. do we have problems here which are uk specific? we do, we have structural vulnerability. we have very limited financial resilience and limited human resilience. so we can catch a cold easier than other countries. and our major problem... our major problem is we don't invest enough, we don't have enough productivity and we don't grow enough. let’s we don't have enough productivity and we don't grow enough. let's look

at rachel reeves's _ and we don't grow enough. let's look at rachel reeves's fiscal _ and we don't grow enough. let's look at rachel reeves's fiscal roots, she l at rachel reeves's fiscal roots, she said she would only borrow to invest so if the cost of servicing debt is going up because of the unelected bond market he is, is herfiscal rule at risk? bond market he is, is her fiscal rule at risk?— bond market he is, is her fiscal rule at risk? -- fiscal rules. it is under pressure, _ rule at risk? -- fiscal rules. it is under pressure, but _ rule at risk? -- fiscal rules. it is under pressure, but i _ rule at risk? -- fiscal rules. it is under pressure, but i suspect i rule at risk? -- fiscal rules. it is i under pressure, but i suspect you will hear over and over again she is fully committed to it and she will meet her fiscal rules. ba; fully committed to it and she will meet her fiscal rules.— meet her fiscal rules. by cutting sendin: meet her fiscal rules. by cutting spending or— meet her fiscal rules. by cutting spending or raising _ meet her fiscal rules. by cutting spending or raising taxes? - meet her fiscal rules. by cutting - spending or raising taxes? probably b cuttin: spending or raising taxes? probably by cutting spending. _ spending or raising taxes? probably by cutting spending, but _ spending or raising taxes? probably by cutting spending, but the - spending or raising taxes? probably by cutting spending, but the hope l spending or raising taxes? probably| by cutting spending, but the hope is and this is really important and i cannot stress it enough that we get a set of structural reforms that enhance productivity and enhance growth potential. without higher growth, we are going to be exposed to any shocks and we are living in a shop prone world. figs to any shocks and we are living in a shop prone world. $5 i to any shocks and we are living in a shop prone world.— shop prone world. as i hinted, we have viewers _ shop prone world. as i hinted, we have viewers who _ shop prone world. as i hinted, we have viewers who are _ shop prone world. as i hinted, we have viewers who are sufficiently | have viewers who are sufficiently old—fashioned that they prefer for our affairs to be run by politicians voted for rather than bond marketeers who are not. but putting that for another newsnight, you are

saying she has got a landing zone and there is a way through four rachel reeves?— and there is a way through four rachel reeves? yes, there is a landinu rachel reeves? yes, there is a landing zone- _ rachel reeves? yes, there is a landing zone. they _ rachel reeves? yes, there is a landing zone. they identified i rachel reeves? yes, there is a landing zone. they identified it| landing zone. they identified it early on after they came into office. they lost traction on the policy side. and now unfortunately, markets are holding accountable. if you borrow so much money that it means that you are vulnerable to markets. ., ., means that you are vulnerable to markets. ., ~ , ., , . markets. thank you very much indeed for “oininu markets. thank you very much indeed forjoining us- — markets. thank you very much indeed forjoining us. thank _ markets. thank you very much indeed forjoining us. thank you _ markets. thank you very much indeed forjoining us. thank you for _ markets. thank you very much indeed forjoining us. thank you for having i forjoining us. thank you for having me. wh forjoining us. thank you for having me- why panel. — forjoining us. thank you for having me. why panel, chris. _ forjoining us. thank you for having me. why panel, chris. you - forjoining us. thank you for having me. why panel, chris. you are - forjoining us. thank you for having i me. why panel, chris. you are going to tell me this _ me. why panel, chris. you are going to tell me this is _ me. why panel, chris. you are going to tell me this is a _ me. why panel, chris. you are going to tell me this is a global— me. why panel, chris. you are going to tell me this is a global problem, i to tell me this is a global problem, but it looks like rachel reeves is under pressure. it is but it looks like rachel reeves is under pressure.— under pressure. it is a global problem- _ under pressure. it is a global problem. but _ under pressure. it is a global problem. but it _ under pressure. it is a global problem. but it looks - under pressure. it is a global problem. but it looks like i problem. but it looks like rachel reeves is under _ problem. but it looks like rachel reeves is under pressure. - problem. but it looks like rachel reeves is under pressure. i - problem. but it looks like rachelj reeves is under pressure. i don't think the uk _ reeves is under pressure. i don't think the uk labour— reeves is under pressure. i don't thinkthe uk labour party - reeves is under pressure. i don't think the uk labour party or- reeves is under pressure. i don't think the uk labour party or this| think the uk labour party or this government underestimates the scale of what _ government underestimates the scale of what the economic challenges we inherited _ of what the economic challenges we inherited when we took over a few months _ inherited when we took over a few months ago is. what i think we need to make _ months ago is. what i think we need to make sure we are focused on as a government— to make sure we are focused on as a government is not the day—to—day movements of the markets which is for market— movements of the markets which is for market traders to worry about,

but the _ for market traders to worry about, but the long—term future of the united — but the long—term future of the united kingdom. two questions. are we fixing _ united kingdom. two questions. are we fixing the foundations of the economy? are we getting the economy growing again? theyjust spoke about how that _ growing again? theyjust spoke about how that was the biggest challenge we have _ how that was the biggest challenge we have to face. there is lots of we have _ we have to face. there is lots of we have done — we have to face. there is lots of we have done to — we have to face. there is lots of we have done to achieve both of those, closing the — have done to achieve both of those, closing the £21 billion black hole and making sure we are doing planning — and making sure we are doing planning reform and putting that money— planning reform and putting that money into the nhs. we have got a heatthy— money into the nhs. we have got a healthy workforce. you will hear a lot more _ healthy workforce. you will hear a lot more from rachel reeves in the coming _ lot more from rachel reeves in the coming weeks about how we will go even further on economic growth and productivity. | even further on economic growth and productivity-— productivity. i asked the question, is she under— productivity. i asked the question, is she under pressure? _ productivity. i asked the question, is she under pressure? no - productivity. i asked the question, is she under pressure? no is - productivity. i asked the question, is she under pressure? no is the l is she under pressure? no is the answer to _ is she under pressure? no is the answer to that. _ is she under pressure? no is the answer to that. the _ is she under pressure? no is the answer to that. the challenge i is she under pressure? no is the - answer to that. the challenge facing the economy is great. rachel will spend _ the economy is great. rachel will spend a _ the economy is great. rachel will spend a lot of her time and her energy— spend a lot of her time and her energy making sure we get the economy— energy making sure we get the economy growing again. is energy making sure we get the economy growing again.- energy making sure we get the economy growing again. is she under ressure? economy growing again. is she under pressure? yes- _ economy growing again. is she under pressure? yes. it— economy growing again. is she under pressure? yes. it is— economy growing again. is she under pressure? yes. it is not _ economy growing again. is she under pressure? yes. it is not difficult - pressure? yes. it is not difficult to say she is under pressure. it may be easier for — to say she is under pressure. it may be easier for me _ to say she is under pressure. it may be easier for me to _ to say she is under pressure. it may be easier for me to say it _ to say she is under pressure. it may be easier for me to say it then - be easier for me to say it then chris and that is a job description! can i explain why? yes, i think it

would be a good idea and chris can come back. it would be a good idea and chris can come back-— come back. it is a mixture of thins. come back. it is a mixture of things- i— come back. it is a mixture of things. ithink— come back. it is a mixture of things. i think there - come back. it is a mixture of things. i think there is - come back. it is a mixture of things. i think there is a - come back. it is a mixture of- things. i think there is a tendency and chris has reflected it fluency of labour to explain the problem on the economy and describe it as if it were kind of giving a tutorial to the country. but i think what the country is interested in now, people understand it at different levels and sometimes there is a misunderstanding, but it is clearly not a good position overall. is there anything rachel reeves can do to get back on track from the budget which while well—intentioned to fill that hole in public finances... i don't accept the 21 billion, it is an interpretation i'm not a fact. can you hold on to the question of is there anything to do? moira can you hold on to the question of is there anything to do?— can you hold on to the question of is there anything to do? now you are bein: strict is there anything to do? now you are being strict on _ is there anything to do? now you are being strict on me _ is there anything to do? now you are being strict on me as _ is there anything to do? now you are being strict on me as well! _ is there anything to do? now you are being strict on me as well! yes. - is there anything to do? now you are being strict on me as well! yes. you| being strict on me as well! yes. you work for the — being strict on me as well! yes. you work for the tory _ being strict on me as well! yes. you work for the tory top _ being strict on me as well! yes. you work for the tory top team - being strict on me as well! yes. you work for the tory top team that - being strict on me as well! yes. you| work for the tory top team that gave us five prime ministers and another market issue so you cannot be worried about rachel reeves being in china and it doesn't matter she is there? in china and it doesn't matter she is

there? ., ., ., ., there? in any organisation if that is in crisis. _ there? in any organisation if that is in crisis, the _ there? in any organisation if thatj is in crisis, the leadership should he in _ is in crisis, the leadership should be in the building _ is in crisis, the leadership should be in the building sorting - is in crisis, the leadership should be in the building sorting their. be in the building sorting their team — be in the building sorting their team so _ be in the building sorting their team so she _ be in the building sorting their team. so she should - be in the building sorting their team. so she should be - be in the building sorting their team. so she should be in - be in the building sorting their team. so she should be in thej team. so she should be in the treasury with— team. so she should be in the treasury with her— team. so she should be in the treasury with her team - team. so she should be in the treasury with her team and atj team. so she should be in the - treasury with her team and at the dispatch— treasury with her team and at the dispatch box — treasury with her team and at the dispatch box answering _ treasury with her team and at the dispatch box answering questionsj dispatch box answering questions because that _ dispatch box answering questions because that is _ dispatch box answering questions because that is something - dispatch box answering questions - because that is something that would -ive because that is something that would give the _ because that is something that would give the markets _ because that is something that would give the markets more _ because that is something that would give the markets more confidence - because that is something that would give the markets more confidence inl give the markets more confidence in her. give the markets more confidence in her the _ give the markets more confidence in her the big — give the markets more confidence in her. the big problem _ give the markets more confidence in her. the big problem she _ give the markets more confidence in her. the big problem she is- give the markets more confidence in her. the big problem she is facing i her. the big problem she is facing is a lack— her. the big problem she is facing is a lack of— her. the big problem she is facing is a lack of confidence _ her. the big problem she is facing is a lack of confidence in - her. the big problem she is facing is a lack of confidence in her - her. the big problem she is facing is a lack of confidence in her from | is a lack of confidence in her from the markets — is a lack of confidence in her from the markets because _ is a lack of confidence in her from the markets because they - is a lack of confidence in her from the markets because they are - is a lack of confidence in her from i the markets because they are clearly not believing — the markets because they are clearly not believing her— the markets because they are clearly not believing her plan _ the markets because they are clearly not believing her plan because - the markets because they are clearly not believing her plan because they. not believing her plan because they are predicting — not believing her plan because they are predicting rises _ not believing her plan because they are predicting rises in _ not believing her plan because they are predicting rises in inflation - are predicting rises in inflation which — are predicting rises in inflation which is — are predicting rises in inflation which is whym _ are predicting rises in inflation which is why. . ._ are predicting rises in inflation which is why... you 'ust heard told to our which is why... you 'ust heard told to faces h which is why... you 'ust heard told to our faces the — which is why... you 'ust heard told to our faces the liz _ which is why... you just heard told to our faces the liz truss - which is why... you just heard told to our faces the liz truss moment | to our faces the liz truss moment was far more delivered, deliberately a british problem than this, this problem is not liz truss mark two. no, and i think it's fair to say the comparison — no, and i think it's fair to say the comparison is _ no, and i think it's fair to say the comparison is not _ no, and i think it's fair to say the comparison is not really- no, and i think it's fair to say the comparison is not really fair- comparison is not really fair because _ comparison is not really fair because this _ comparison is not really fair because this is _ comparison is not really fair because this is smaller. - comparison is not really fair because this is smaller. but comparison is not really fair- because this is smaller. but can i quickly— because this is smaller. but can i quickly point _ because this is smaller. but can i quickly point out _ because this is smaller. but can i quickly point out that _ because this is smaller. but can i quickly point out that i— because this is smaller. but can i quickly point out that i think - quickly point out that i think rache!— quickly point out that i think rachel has— quickly point out that i think rachel has been _ quickly point out that i think rachel has been benefited l quickly point out that i think - rachel has been benefited from the liz truss _ rachel has been benefited from the liz truss problem _ rachel has been benefited from the liz truss problem because - rachel has been benefited from the liz truss problem because the - rachel has been benefited from thej liz truss problem because the bank of england — liz truss problem because the bank of england stepped _ liz truss problem because the bank of england stepped in— liz truss problem because the bank of england stepped in after- liz truss problem because the bank of england stepped in after the - liz truss problem because the bank of england stepped in after the liz. of england stepped in after the liz truss— of england stepped in after the liz truss budget _ of england stepped in after the liz truss budget. before _ of england stepped in after the liz truss budget. before that, - of england stepped in after the liz truss budget. before that, we - of england stepped in after the liz. truss budget. before that, we didn't know whether— truss budget. before that, we didn't know whether they— truss budget. before that, we didn't know whether they were _ truss budget. before that, we didn't know whether they were able - truss budget. before that, we didn't know whether they were able or - know whether they were able or wilting _ know whether they were able or willing to — know whether they were able or willing to do _ know whether they were able or willing to do so _ know whether they were able or willing to do so and _ know whether they were able or willing to do so and now- know whether they were able or willing to do so and now that i know whether they were able or. willing to do so and now that would be willing to do so and now that would he at _ willing to do so and now that would he at the _ willing to do so and now that would he at the hack— willing to do so and now that would be at the back of— willing to do so and now that would be at the back of the _ willing to do so and now that would be at the back of the minds - willing to do so and now that would be at the back of the minds of- willing to do so and now that would be at the back of the minds of the i be at the back of the minds of the market— be at the back of the minds of the market so— be at the back of the minds of the market so it — be at the back of the minds of the market so it could _ be at the back of the minds of the market so it could have _ be at the back of the minds of the market so it could have been - be at the back of the minds of the market so it could have been a i be at the back of the minds of the i market so it could have been a much worse _ market so it could have been a much worse problem — market so it could have been a much worse problem had _ market so it could have been a much worse problem had liz— market so it could have been a much worse problem had liz truss- market so it could have been a much worse problem had liz truss not- worse problem had liz truss not happen — worse problem had liz truss not happen. li2— worse problem had liz truss not ha en. , , , worse problem had liz truss not ha en. ,, , .,

worse problem had liz truss not hauen. ,, ,., ., happen. liz truss did us all a favour? no, _ happen. liz truss did us all a favour? no, that _ happen. liz truss did us all a favour? no, that is _ happen. liz truss did us all a favour? no, that is not - happen. liz truss did us all a favour? no, that is not what| happen. liz truss did us all a | favour? no, that is not what i happen. liz truss did us all a - favour? no, that is not what i mean! it was the irony! _ favour? no, that is not what i mean! it was the irony! very _ favour? no, that is not what i mean! it was the irony! very tricky, - favour? no, that is not what i mean! it was the irony! very tricky, isn't i it was the irony! very tricky, isn't he? i don't believe she should not be in china. turning up at the dispatch box might be nice for the opposition to see the chancellor sweat in this position, but it would not necessarily reassure the markets. let's not only talk about markets, let's talk about the right thing to do. i markets, let's talk about the right thing to do-_ markets, let's talk about the right thin to do. , ., , ., ., thing to do. i promised i would ask that question. very _ thing to do. i promised i would ask that question. very briefly, - thing to do. i promised i would ask that question. very briefly, i think| that question. very briefly, i think she should — that question. very briefly, i think she should be _ that question. very briefly, i think she should be in _ that question. very briefly, i think she should be in china. _ that question. very briefly, i think she should be in china. you - that question. very briefly, i think she should be in china. you have. she should be in china. you have said that- — she should be in china. you have said that. chris, _ she should be in china. you have said that. chris, a _ she should be in china. you have said that. chris, a very _ she should be in china. you have said that. chris, a very good - said that. chris, a very good question, what should you actually do? i interrupted you early and i think you are trying to tell me stuff i want you to tell us now 1402 00:11:37,2