UK government borrowing costs have increased sharply amid speculation about Rachel Reeves's future as chancellor. Investors warned that Labour's reversal on welfare policies created a significant deficit in public finances. Following weakened support from Keir Starmer during prime minister's questions, the yield on 10-year UK government bonds surged, marking the largest one-day rise since October 2022. The pound also fell against the US dollar, signaling concerns over government fiscal strategies. A parliamentary rebellion led to the withdrawal of a substantial cut to disability benefits, raising questions about fiscal rule adherence without tax increases.
UK government borrowing costs surged as speculation over Rachel Reeves's role as chancellor intensified. City investors flagged a multibillion-pound deficit due to Labour's welfare policy reversal.
Following Keir Starmer's tepid support for chancellor at prime minister's questions, the yield on 10-year UK government bonds had its highest daily increase since October 2022.
Investor confidence was shaken as the pound fell by over 1% against the US dollar, indicating rising unease about the government’s fiscal strategies.
The government's withdrawal of a planned 5.5bn cut to disability benefits after Labour MPs rebelled, raises questions over the sustainability of fiscal rules without tax increases.
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