Cost of Britain’s borrowing hits 27 year high sparking fears of more tax hikes
THE cost of Britain’s borrowing hit a 27-year high yesterday — sparking fears of more tax rises.
Squeezed Chancellor Rachel Reeves is “within a whisker” of breaking her own economic rules, say economists.
It comes after traders demanded 5.24 per cent interest, or yield, on 30-year government bonds — gilts — the bedrock of a nation’s financial system.
Yields rise when gilt prices fall as investors consider them less attractive or riskier.
The yield on 30-year gilts was last so high in 1998 when Tony Blair was PM during financial crises worldwide.
They are trading higher now than after former PM Liz Truss’s mini-Budget, as the markets bet against UK growth prospects.
The bond market is also jittery this week as the Treasury’s Debt Management Office is selling more than £6billion-worth, flooding the market.
Ruth Gregory, of financial research firm Capital Economics, said the Chancellor was in a spot.
She said: “In recent years, the fiscal headroom has never been this low.
“Reeves could soon face a nasty choice of breaking her fiscal rules or announcing more tax rises and/or spending restraint at a time when the economy is already weak.”
Shadow Business Secretary Andrew Griffith MP said the gilt rate high indicated investors were “voting with their feet” and had no faith in Labour’s economic plan.
He said: “The cost of this will be paid by businesses and households in higher interest rates.”
Shadow Chancellor Mel Stride said Labour had talked the economy down, “taxed the life” out of it and “driven it into a ditch”.
Next rap at Rachel
THE boss of Next has slammed Rachel Reeves’ Budget for knocking growth and pushing prices up higher.
The retailer said October’s tax raid means it would have to raise prices by one per cent — and bring in self-service tills due to a £73million hike in employee costs.
Lord Simon Wolfson said yesterday: “Tax rises definitely are not going to produce growth.”