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Government borrowing costs highest since 1998
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Incoming tax rises as Britain’s long-term borrowing costs have hit their highest level in 27 years.
Inevitable pressure on Rachel Reeves before the autumn budget.
The yield, (interest rate), on 30 year UK government debt reached 5.680% on Tuesday morning. That is its highest level since 1998, indicating that it will cost the UK more to borrow from the markets, above the previous 27 year high of 5.64% set in April 2025.
New ‘no money left’ Labour doubled the national debt when they left office in 2010, then the tories trebled that again. £434bn in 1997 has been increased to £2.8 trn today. Add 700 PFI contracts and it’s over three trillion, add impact of austerity and nearer four trillion. It’s more the perpetual increasing debt than the cost of interest.
Can’t be blaming small boats for any of this.
Who’s getting hit next for taxes. |
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By (user no longer on site) 35 weeks ago
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Reeves has lost all credibility, and has been sidelined in Starmer’s latest reshuffle.
If taxes go up in October, which they almost certainly will, and despite her telling us last year that there would be no more tax rises in this Parliament, her humiliation will be complete.
Is Starmer preparing the ground for her to be the “fall guy” in October when the inevitable happens? He can say that he never promised no new taxes, and the now departed Reeves spoke out of turn. |
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By (user no longer on site) 35 weeks ago
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"Reeves has lost all credibility, and has been sidelined in Starmer’s latest reshuffle.
If taxes go up in October, which they almost certainly will, and despite her telling us last year that there would be no more tax rises in this Parliament, her humiliation will be complete.
Is Starmer preparing the ground for her to be the “fall guy” in October when the inevitable happens? He can say that he never promised no new taxes, and the now departed Reeves spoke out of turn."
It's poor leadership by Starmer. He's undermined Reeves and she's now effectively a lame duck Chancellor waiting for the guillotine to fall. This could spook financial markets and harm an already precarious economy. But higher taxes now seem inevitable. |
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Please excuse my ignorance here, and I am coming at this from a place of no particular political allegiance (on this matter). I am hoping someone better informed can help me understand the situation better.
Am I correct in thinking that the money spent getting the country through Covid was the single biggest unexpected cost to the country since the Second World War? (The debt for which we only finished paying off a couple of years ago, nearly 80 years after its finish). Assuming this is the case, how are we expecting to pay this huge, unbudgeted debt back without increasing money coming into the government’s coffers? If we don’t increase the amount coming in, what alternatives are there to deal with this situation, other than letting the amount of interest owed on the debt grow?
I’m not looking to score political points here, or start an argument between the usual suspects about Left v Right, genuinely interested in knowing where the fiscal cost of Covid features in all of this. |
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By *otMe66Man 35 weeks ago
Terra Firma |
"Please excuse my ignorance here, and I am coming at this from a place of no particular political allegiance (on this matter). I am hoping someone better informed can help me understand the situation better.
Am I correct in thinking that the money spent getting the country through Covid was the single biggest unexpected cost to the country since the Second World War? (The debt for which we only finished paying off a couple of years ago, nearly 80 years after its finish). Assuming this is the case, how are we expecting to pay this huge, unbudgeted debt back without increasing money coming into the government’s coffers? If we don’t increase the amount coming in, what alternatives are there to deal with this situation, other than letting the amount of interest owed on the debt grow?
I’m not looking to score political points here, or start an argument between the usual suspects about Left v Right, genuinely interested in knowing where the fiscal cost of Covid features in all of this. "
We don’t need to clear the covid debt, but reducing it at lower repayment rates would obviously be beneficial. The goal will be to roll the debt forward with repayments that are favourable and don't need tax hikes or cuts to sustain them. Which is why we have been hearing a lot about growth, but an important part is missing, stability. To achieve the best outcomes we need both growth and stability. If confidence in government policy drops (stability), gilt yields rise, the cost of repaying the debt increases and any cuts / tax increases get swallowed up (Growth loss).
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By *otMe66Man 35 weeks ago
Terra Firma |
"Reeves has lost all credibility, and has been sidelined in Starmer’s latest reshuffle.
If taxes go up in October, which they almost certainly will, and despite her telling us last year that there would be no more tax rises in this Parliament, her humiliation will be complete.
Is Starmer preparing the ground for her to be the “fall guy” in October when the inevitable happens? He can say that he never promised no new taxes, and the now departed Reeves spoke out of turn."
He has definitely set up Reeves for the fall post Autumn budget. He will either claim he made a clear and decisive decision by removing her, and leave out the part that he made a clear and decisive mistake by appointing her in the first place. Or more likely she will resign shortly after the budget claiming to be complicating the labour landscape with the negative attention being brought down on them.
Baroness Minouche Shafik, seems like a good move from Starmer that will allow this to unfold. |
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We don’t need to clear the covid debt, but reducing it at lower repayment rates would obviously be beneficial. The goal will be to roll the debt forward with repayments that are favourable and don't need tax hikes or cuts to sustain them. Which is why we have been hearing a lot about growth, but an important part is missing, stability. To achieve the best outcomes we need both growth and stability. If confidence in government policy drops (stability), gilt yields rise, the cost of repaying the debt increases and any cuts / tax increases get swallowed up (Growth loss).
"
Thank you. I appreciate you taking the time to respond to me. Makes it a lot clearer. |
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"Incoming tax rises as Britain’s long-term borrowing costs have hit their highest level in 27 years.
Inevitable pressure on Rachel Reeves before the autumn budget.
The yield, (interest rate), on 30 year UK government debt reached 5.680% on Tuesday morning. That is its highest level since 1998, indicating that it will cost the UK more to borrow from the markets, above the previous 27 year high of 5.64% set in April 2025.
New ‘no money left’ Labour doubled the national debt when they left office in 2010, then the tories trebled that again. £434bn in 1997 has been increased to £2.8 trn today. Add 700 PFI contracts and it’s over three trillion, add impact of austerity and nearer four trillion. It’s more the perpetual increasing debt than the cost of interest.
Can’t be blaming small boats for any of this.
Who’s getting hit next for taxes. "
Blame the Trump |
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"Please excuse my ignorance here, and I am coming at this from a place of no particular political allegiance (on this matter). I am hoping someone better informed can help me understand the situation better.
Am I correct in thinking that the money spent getting the country through Covid was the single biggest unexpected cost to the country since the Second World War? (The debt for which we only finished paying off a couple of years ago, nearly 80 years after its finish). Assuming this is the case, how are we expecting to pay this huge, unbudgeted debt back without increasing money coming into the government’s coffers? If we don’t increase the amount coming in, what alternatives are there to deal with this situation, other than letting the amount of interest owed on the debt grow?
I’m not looking to score political points here, or start an argument between the usual suspects about Left v Right, genuinely interested in knowing where the fiscal cost of Covid features in all of this. "
Your question is valid.
You either need to raise taxes or increase the size of the economy (which will give you the required tax boost).
Debt is fine if you are using it create an asset (ie grow the economy if you are the government). It should generally not be taken on for day to day living expenses (which is essentially what happened with the lockdown borrowing).
The covid borrowing is a large amount of the new debt but our bigger issue is a woeful level of productivity in the UK economy. We just don’t work as efficiently as other countries and that makes the debt burden harder for us to shift. |
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By *otMe66Man 35 weeks ago
Terra Firma |
"Please excuse my ignorance here, and I am coming at this from a place of no particular political allegiance (on this matter). I am hoping someone better informed can help me understand the situation better.
Am I correct in thinking that the money spent getting the country through Covid was the single biggest unexpected cost to the country since the Second World War? (The debt for which we only finished paying off a couple of years ago, nearly 80 years after its finish). Assuming this is the case, how are we expecting to pay this huge, unbudgeted debt back without increasing money coming into the government’s coffers? If we don’t increase the amount coming in, what alternatives are there to deal with this situation, other than letting the amount of interest owed on the debt grow?
I’m not looking to score political points here, or start an argument between the usual suspects about Left v Right, genuinely interested in knowing where the fiscal cost of Covid features in all of this.
Your question is valid.
You either need to raise taxes or increase the size of the economy (which will give you the required tax boost).
Debt is fine if you are using it create an asset (ie grow the economy if you are the government). It should generally not be taken on for day to day living expenses (which is essentially what happened with the lockdown borrowing).
The covid borrowing is a large amount of the new debt but our bigger issue is a woeful level of productivity in the UK economy. We just don’t work as efficiently as other countries and that makes the debt burden harder for us to shift."
Improving productivity is key as you say, but it’s a slow burner. Stability in government policy and borrowing costs I feel is the short term win, otherwise the room to invest in productivity again as you mention just gets wiped out. |
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"This short BBC article by Faisal Islam gives a fairly balanced view of things...
https://www.bbc.co.uk/news/articles/clyry4rg9wyo"
The elephant in the room is the £2.5 trillion new Labour and tories have added to what was an affordable debt. Now it isn’t. |
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By *otMe66Man 35 weeks ago
Terra Firma |
"This short BBC article by Faisal Islam gives a fairly balanced view of things...
https://www.bbc.co.uk/news/articles/clyry4rg9wyo"
The BoE selling off its QE stock just before we head into the Autumn Budget is bad timing for the Treasury. With the Bank and government both pushing gilts into the market, yields are more likely going one way. Without tax rises, it’s hard to see how Reeves can present a plan that looks workable to markets. Any hint of unfunded pledges will push borrowing costs even higher, again.
On the positive side, Starmer bringing in an economic adviser who reports directly to him and not Reeves is smart. Credibility should should help calm markets, but she’ll have her work cut out. |
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By *otMe66Man 35 weeks ago
Terra Firma |
Autumn budget announced for 26th Nov.
Not a bad thing in my opinion, it lines up with the OBR 10week forecasting window and gives extra time for gilt markets to settle down before Reeves delivers the plan.
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By *hirleyMan 35 weeks ago
Wine bar |
Another thread where it feels like everyone here is missing the basic point.
People are talking about government debt as if it works like a household budget and it simply just doesn’t. It's not even isolated to this thread because people often do it whenever they talk about economics. Talking about things while being stuck in the gold standard mindset, which ended in August 1971 btw, is just bonkers. Most people alive today have only ever lived in a fiat currency world, and most in this thread won't remember what it was like in the Bretton woods system. Yet people still talk as if money is backed by gold bars still.
***The UK issues its own sovereign currency, so it can NEVER “run out of money” in the way we as individuals can.***
A lot of the debate here is still treating government debt like a jar of coffee or a pot of gold ie. finite, once it’s gone it’s gone. That’s not how it works anymore. The pound isn’t backed by gold or coffee beans, it’s just a unit the government issues. To households money is a hard limit, absolutely, but to the state it’s a policy tool. Government doesn't "spend" from tax income like a business does when it's balancing it’s books 😂
The real constraint isn’t how big the debt number looks, it’s whether there’s enough productive capacity in the economy (workers, skills, infrastructure) to meet demand without driving up inflation.
That’s the core of MMT: deficits aren’t necessarily bad, just as surpluses aren’t necessarily good. What matters is whether spending is targeted at boosting capacity or just pushing up prices. Arguments about gold sales, who left a note in the Treasury, or whether borrowing is at a “record” are really side shows if you don’t address that central truth.
If you want to understand how this works, do yourself a favour and read up on MMT. This is way before we start talking about "growth" or boat people or [insert other media distraction of the month] |
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"The UK issues its own sovereign currency, so it can NEVER “run out of money” in the way we as individuals can."
That's true, but irrelevant.
Governments have to pay back their debts, otherwise no one in the future will lend them any money. And governments can't just print money to pay back debts, because they can't control what use that money would be put to, so it might cause hyper-inflation.
And that's before we get to the point that not all of the government's debts are in sterling. Some of them are in other currencies that we can't just print up some money for. |
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By *hirleyMan 35 weeks ago
Wine bar |
"The UK issues its own sovereign currency, so it can NEVER “run out of money” in the way we as individuals can.
That's true, but irrelevant.
Governments have to pay back their debts, otherwise no one in the future will lend them any money. And governments can't just print money to pay back debts, because they can't control what use that money would be put to, so it might cause hyper-inflation.
And that's before we get to the point that not all of the government's debts are in sterling. Some of them are in other currencies that we can't just print up some money for."
That's not the mic drop you think it is. Cherry picking one line, stripping it of context and calling it “irrelevant". Throwing around that old chestnut of hyperinflation as if I don’t know what causes it, isn’t an argument.
Being a currency issuer is the fundamental point to MMT and the central bank. Taxes exist in a fiat system to create demand for the currency and to manage inflation.
Government doesn’t “print” recklessly and I never inferred it has. It spends in sterling, and taxation (plus bond issuance) pulls money back out of circulation under control of its own central bank.
And on the foreign debt point, just no. Almost all UK government debt is in sterling. If someone holds it abroad, it’s still denominated in pounds. If those investors want it in dollars, euros or yen, that’s a conversion cost on them, not something the UK government has to worry about; printing foreign currency or whatever you're on about.
So no, it’s not “just printing money,” and it’s not irrelevant, it’s the core of how a modern sovereign currency works. |
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I'm well aware of how Modern Monetary Theory is purported to work. If I've understood your first post correctly you're saying that the UK doesn't have to worry about debt because it can just print more money to cover it all. While that works in the theory, it doesn't in real life because the currency starts to look worth less, and that means that investors go elsewhere to get their security.
MMT is a nice idea if there's one currency, and you can decide what it gets spent on. It doesn't work if you have to interact with lots of other countries that have their own currencies and their own ideas about how to control them. |
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"Another thread where it feels like everyone here is missing the basic point.
People are talking about government debt as if it works like a household budget and it simply just doesn’t. It's not even isolated to this thread because people often do it whenever they talk about economics. Talking about things while being stuck in the gold standard mindset, which ended in August 1971 btw, is just bonkers. Most people alive today have only ever lived in a fiat currency world, and most in this thread won't remember what it was like in the Bretton woods system. Yet people still talk as if money is backed by gold bars still.
***The UK issues its own sovereign currency, so it can NEVER “run out of money” in the way we as individuals can.***
A lot of the debate here is still treating government debt like a jar of coffee or a pot of gold ie. finite, once it’s gone it’s gone. That’s not how it works anymore. The pound isn’t backed by gold or coffee beans, it’s just a unit the government issues. To households money is a hard limit, absolutely, but to the state it’s a policy tool. Government doesn't "spend" from tax income like a business does when it's balancing it’s books 😂
The real constraint isn’t how big the debt number looks, it’s whether there’s enough productive capacity in the economy (workers, skills, infrastructure) to meet demand without driving up inflation.
That’s the core of MMT: deficits aren’t necessarily bad, just as surpluses aren’t necessarily good. What matters is whether spending is targeted at boosting capacity or just pushing up prices. Arguments about gold sales, who left a note in the Treasury, or whether borrowing is at a “record” are really side shows if you don’t address that central truth.
If you want to understand how this works, do yourself a favour and read up on MMT. This is way before we start talking about "growth" or boat people or [insert other media distraction of the month]"
You have just outlined why productivity is the biggest limiting factor in government spending, not the amount of printed money. And why growth is the key measure of borrowing capacity before things turn untenable. |
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Debt is debt irrespective of who issues it.
Yes, government have a lot more flexibility to raise debt than a household but even that has limits. A reserve currency gives you an extra bite of the cake but sterling is not a reserve currency in any meaningful sense any more. That ship has sailed.
Debt spirals can occur at the human level and the state level because they are both subject to the power of compounding interest. Once it starts to run away you are in trouble, irrespective of your size.
Used properly it is amazing but history is full of countries that have been destroyed by runaway debt when it has been spent on unproductive things. |
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