Borrowing costs soar - will Rachel Reeves have to go back on her word?

Coffee House Shots

The Spectator

News, Politics, Government, Daily News

4.4 • 2.1K Ratings

🗓️ 9 January 2025

⏱️ 12 minutes

🔗️ Recording | iTunes | RSS

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Summary

Long term borrowing costs for the government have reached levels not seen since 1998, and 10 year UK gilts are now at their highest point since the 2008 financial crash. Both surpass the levels seen during the Liz Truss premiership - and this hasn't gone unnoticed by the former PM. A set of similar circumstances, but could the consequences be the same? What are the economic - and political - challenges facing Keir Starmer and Rachel Reeves?

James Heales speaks to Kate Andrews and Katy Balls to unpack the latest tranche of economic data.

Produced by Patrick Gibbons.

Transcript

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0:00.0	The Spectator magazine is home to wonderful writing, insightful analysis and unrivaled books and arts reviews.
0:06.2	Subscribe today for just £12 and receive a 12-week subscription in print and online,
0:11.5	along with a free £20 £10, John Lewis or Waitrose voucher.
0:15.0	Go to spectator.com.uk forward slash voucher.
0:28.7	Hello and welcome to coffee house shots.
0:29.4	I'm James.
0:33.5	I'm joined today by Kate Andrews and Kate Hades and Kate, the headline of the daily mail today on the front says, market turmoil sounds red alert for Chancellor.
0:37.7	How much trouble is Rachel Reeves in?
0:39.2	It hasn't been a great week.
0:41.4	It's strange to be saying this, but Elon Musk may have actually helped the Labor government
0:45.9	slightly with all the mudslinging at the start of the week because it distracted from what has
0:49.9	been happening for days now, which is that borrowing costs for the government continue to rise.
0:55.9	It sounds technical. It is technical. But the implications of this is that as borrowing costs go up,
1:01.2	the UK has to pay more money to service this debt. We're not talking thousands or millions.
1:05.5	We're talking billions of billions of pounds to do this. And that means that Rachel Reeves has a lot
1:10.7	less headroom or potentially none at all to do this. And that means that Rachel Reeves has a lot less headroom,
1:11.4	or potentially not at all, to spend on the projects that she wants to spend on, to do the things
1:17.2	that the government wants to do without breaking her own fiscal rules. So long-term borrowing
1:22.5	costs for the government have climbed to their highest level since 1998. The 10-year UK guilts are up to their highest point since 2008 during the financial crisis.
1:32.1	Both of these figures surpass what happened after Liz Truss's many budgets.
1:37.5	So not only do you have quite a difficult situation financially for the government,
1:41.5	you also have a political battle going on.
	...

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