Government borrowing costs surged to their highest level in nearly a year after the largest tax raising Budget in history. The Telegraph has more.
Bond markets took fright to the Chancellor’s proposed debt-fuelled spending binge by pushing up the yield on the main type of Government by nine basis points to 4.41% — putting it on track for its highest close since November.
Meanwhile, two-year debt surged as much as 12 basis points to 4.38% after the Budget.
The move was prompted by a larger-than-expected bond sale plan by the Government, with the Treasury planning to increase sales by £19 billion more than expected.
In April, markets were told that Britain would issue £278 billion of debt through the Debt Management Office, which issues U.K. debt.
The Government has now ramped this up and plans to sell £297 billion of bonds this year, higher than expected.
The sale is the largest ever put forward by a U.K. Government, excluding the huge debt raise during the COVID-19 pandemic.
Nigel Farage compared the market reaction to Liz Truss’s infamous mini-budget of 2022. Speaking in the Commons, the Reform leader said:
I sat listening to the numbers. This budget is illiterate. I don’t know who’s doing the sums, whether perhaps it’s the Rt Hon Member for Hackney North [Diane Abbott], but the sums do not work.
And the markets now agree with me, because just in the last couple of hours, we’ve seen a very substantial spike in gilt yields.
We’re not quite yet back to 2022 with that mini budget. But clearly, clearly, people are saying this isn’t going to work.
Contrary to Labour’s claim that it is honouring its manifesto commitment not to raise taxes on working people, the Office for Budget Responsibility said that workers will shoulder 80% of the increase in employer National Insurance long term through lost wage increases and lower income.
The official watchdog also warned that homeowners face a hike in mortgage rates as Labour’s borrowing binge will drive up inflation and mean higher interest rates for longer.
Downgrading its growth forecasts for years three to five, the OBR gave the Government just a 54% chance of achieving its aim of a budget surplus by 2029.
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