Disaster for Rachel Reeves as borrowing costs near highest level since 1998

Britain's long term borrowing costs have approached their highest level this century, spelling further disaster for Rachel Reeves. The yield on 30-year UK gilts rose as high as 5.64% in early trading before falling back to 5.59% on Wednesday (August 27).

The rise is just below a level last seen in 1998. It piles further pressure on the Chancellor ahead of the autumn Budget amid jitters over the outlook of Britain's economy. Shadow Chancellor Sir Mel Stride said: "This is what happens when you spend and borrow like there's no tomorrow."

Alex Kerr, an economist at Capital Economics, told the Financial Times that, if sustained, the recent increases in gilt yields would reduce Ms Reeves' headroom from £9.9billion as of the Spring Statement to £5.3bn.

He told the same publication that increased debt servicing costs combined with potential downgrades to growth forecasts by the Office for Budget Responsibility might force the Chancellor to raise as much as £27bn in her Budget to plug the hole in Britain's public finances.

Robert Dishner from US asset manager Neuberger Berman told the FT that if Ms Reeves were to raise taxes in the autumn to improve the public finances, it would likely slow growth further.

He said this could put more pressure on stagflation, where high inflation, unemployment and stagnant demand hit an economy.

Andrew Griffith MP, Shadow Business Secretary, said Labour's reckless spending is hammering taxpayers.

He added: "Every time this rate goes up, it's an even heavier burden on the shoulders of the next generation.

"We've got a huge problem on our hands, and cutting spending is the only way to solve it."

Bond yields globally have also seen rises in the wake of a battle between US President Donald Trump and the US Federal Reserve.

The Treasury has been approached for comment.