Summary
The UK's government borrowing costs have increased after reports suggested that the Chancellor, Rachel Reeves, has decided against raising income tax in the upcoming Budget. The interest rates on UK government bonds, which represent borrowing costs, have risen as a result. This decision has raised concerns about how the government will manage its finances without the expected tax increase.
Key Facts
- The interest rate on 10-year UK government bonds increased to 5.56% from 5.44%.
- Similar increases occurred for 20- and 30-year government bonds, known as gilts.
- The Chancellor, Rachel Reeves, has reportedly dropped plans to raise income tax in the upcoming Budget.
- Investors had expected an income tax hike and were surprised by this change.
- Concerns have been raised about how the government will fill its financial gaps without the tax increase.
- The pound has fallen in response to market concerns about fiscal management.
- Reeves has set goals not to borrow for day-to-day spending and to reduce government debt as a share of national income.
- Think tanks estimate that the government needs to find £22-25bn to meet its financial commitments.
