UK borrowing costs hit 27-year high adding to pressure on Reeves

Long -term government borrowing costs in the UK has reached the highest levels since 1998 on Tuesday, and contributed to the chancellor pressure in front of the budget.

The interest rate in 30 -year -old government bonds, known as yields, rose to 5,698%, the highest level for 27 years, and concerns grew about the state’s financial situation.

In order to meet the financial rules of Rachel Reeves by Chancellor, there are increasing expectations that it will increase the budget taxes later this year.

In the money markets, the pound fell more than 1% against the dollar on Tuesday morning.

Governments borrow money from investors – this is a loan that the government promises to repay it at the end of an agreed period.

The return on 30 -year -old UK government bonds, known as GILTS, has been increasing for several months, which makes the government borrow money more expensive due to higher interest payments.

The Budget Responsibility Office (OBR), the official estimating of the government, takes into account whether the chancellor meets the self -imposed financial rules.

When it was a chancellor, Reeves set two rules on government borrowing. These:

• Daily government costs will be paid according to tax revenue instead of borrowing until 2029-30.

• To ensure that the debt falls as a share of national income by the end of this parliament in 2029-30

Some of Reeves’ under pressure is that the financial buffer is relatively thin £ 10 billion.

Money and Market President Susannah Streeter, Hargreaves Lansdown, “The United Kingdom Chancellor faced with very difficult elections in the upcoming budget and a warning by gilding investors.

“They are clearly worried that the government may lose its grip on public finances.”

There is a lot of speculation about which taxes can increase in the autumn budget of Reeves.

An proposed option is that the freezing of the income tax thresholds that will end in 2028 can be expanded. Freezing means that more people are dragged to pay higher tax rates.

There are also reports that Reeves intends to reform in real estate taxes.

“With many options to raise taxes in summer, it seems to be concerned that the decisions may not be considered sufficiently.” He said.

“The concern will lead to a vicious circle, not only the government polls will not be renewed, but they will be filled at the expense of growth.”