Reeves under pressure as borrowing costs hit 27-year high

upday.com 5 godzin temu
The Bank of England building in the City of London, Britain's central bank responsible for setting interest rates that affect government borrowing costs. (Illustrative image) (Photo by JUSTIN TALLIS/AFP via Getty Images) Getty Images

UK government borrowing costs have surged to their highest level in 27 years, creating intense pressure on Chancellor Rachel Reeves ahead of the Autumn Budget. The 30-year government bond yields hit approximately 5.7 per cent, marking the most expensive borrowing costs since 1998.

The dramatic spike coincides with preparations for the crucial Autumn Budget and follows recent government reshuffle decisions. The timing puts Reeves in an increasingly difficult position as she attempts to balance public spending commitments with market confidence.

Market turmoil

The FTSE 100 declined sharply while the pound experienced its worst day in almost three months, falling 1.5 per cent against the dollar to around $1.34. UK gilt yields now exceed those of US and French bonds, despite those countries facing their own political instability.

According to City A.M., government debt interest payments reached £104 billion in 2024, effectively doubling the defence budget and nearly matching education spending. This represents a massive fiscal burden that constrains future policy options.

Political pressure mounts

Bond traders have blamed what City A.M. reports as a "chorus of high tax advocates" in Number 10, specifically citing recent appointments of Minouche Shafik and Torsten Bell. The market reaction suggests deep scepticism about the government's fiscal direction.

The Chancellor faces the challenge of reassuring markets while maintaining Labour's spending commitments. The 27-year high in borrowing costs creates a particularly stark reminder of fiscal constraints, as Reeves would have been an Oxford student when yields last reached these levels in 1998.

Sources used: "Birmingham Mail", "BBC", "Daily Mail", "Mirror", "GB News", "Guardian", "Independent", "Evening Standard", "City A.M."

Note: This article has been edited with the help of Artificial Intelligence.

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