Britain's borrowing costs have surged to levels not seen since 1998, prompting a poll on whether Labour has made a bigger mess of the economy than Liz Truss.
Thirty-year UK government bond yields climbed above 6% on Thursday, reaching 6.029% — their highest level since the January after Tony Blair came to power. The sharp rise came as global bond markets were hit by concerns over inflation, higher energy prices and interest rates.
But the move in UK borrowing costs was sharper than in equivalent German bonds, highlighting concerns over Britain's public finances ahead of the Chancellor, John Healey's first Budget. Higher gilt yields mean it becomes more expensive for the Government to borrow and refinance its existing debt.
Debt figures and comparisons
Official figures show public sector net debt stood at £2,985.5billion, or 93.8% of GDP, at the end of August. Borrowing in the financial year so far was also £8.1billion above the Office for Budget Responsibility's March forecast.
The figures have revived comparisons with Liz Truss's disastrous 2022 premiership and her controversial mini-Budget. When Ms Truss and her Chancellor, Kwasi Kwarteng, unveiled their Growth Plan in September 2022, sterling fell by about 4% against the dollar on the day while gilt yields rose sharply.
The House of Commons Library said economists largely agreed there was a UK-specific component to the increase in borrowing costs, with some of that linked to the mini-Budget. The turmoil became severe enough for the Bank of England to intervene in the gilt market, warning of a material threat to financial stability. It ultimately bought £19.3billion of gilts during the temporary intervention.
Labour's defence and current pressures
Ms Truss left office after just 49 days, with Rishi Sunak replacing her as Prime Minister. Labour has faced a different set of economic pressures. Rachel Reeves served as Chancellor under Keir Starmer.
Mr Burnham has defended the Government's record, pointing to growth and falling borrowing, while blaming economic vulnerabilities on the previous Conservative government. He has also said his Government will maintain fiscal discipline.
However, the latest gilt-market turmoil comes as Labour prepares its Budget against a backdrop of high debt, elevated borrowing costs and pressure on household finances. Investors are understood to be pricing in the possibility of further Bank of England interest-rate rises.
