Britain’s finance minister, Rachel Reeves, pledged on Wednesday to maintain strict control of public spending as long-term debt interest rates hit their highest level in decades. She also confirmed November 26, as the date for her annual budget statement.
The pound fell sharply on Tuesday after the yield on 30-year government bonds reached its highest since 1998, fuelling concern over rising state debt across major economies.
“We must bring inflation and borrowing costs down by keeping a tight grip on day-to-day spending through our non-negotiable fiscal rules,” Reeves said.
The UK economy has struggled since Labour’s election victory last year, when Reeves increased taxes and reduced public spending. Several policies were later reversed after fierce criticism, and her future as chancellor is under renewed scrutiny ahead of the budget.
Speculation intensified after Prime Minister Keir Starmer promoted Reeves’s Treasury deputy, Darren Jones, to chief secretary.
Reeves maintains she is working to balance the books, ensuring tax revenues cover day-to-day spending while borrowing is reserved for investment.
Analysts warn, however, that more tax rises are likely in November to close the fiscal gap. “Further tax hikes are almost certain,” said Matthew Ryan of financial services firm Ebury. “But investors also want spending cuts, wary of a perpetual tax trap choking the economy.”
The Resolution Foundation think tank said surging bond yields were adding over £3 billion to annual debt interest, while Labour’s U-turns, including reversing cuts to social care, had added £6 billion to costs.
“The chancellor has fired the starting pistol on the countdown to one of the toughest second budgets in living memory,” said the foundation’s chief executive, Ruth Curtice.
Meanwhile, the National Institute of Economic and Social Research estimates that an additional £41 billion per year will be needed by 2030 to balance the public accounts.