The expenses of servicing the UK’s £2.7 trillion debt pile are rising, and Rachel Reeves has been advised that she is “walking a tightrope” in the impending budget.
Following a stormy beginning to Labour’s term in office, the Chancellor is gearing up to present a significant first fiscal package on October 30.
However, because of market anxiety over Ms Reeves’ potential to scrap borrowing regulations, interest rates on UK government bonds have been rising recently.
Bank of England liabilities and other debt could be reclassified to give ministers another £30 billion of headroom—or perhaps even more—for infrastructure projects.
The yield on 10-year gilts is now running at around 4.2 percent, up from as low as 3.7 percent in mid-September, reflecting higher risk to the public finances and concerns about ‘sticky’ inflation.
Mark Dowding, chief investment officer at RBC BlueBay Asset Management, told the Financial Times: ‘Financial markets won’t afford much room for additional borrowing.
‘Rachel Reeves needs to walk a tightrope; otherwise, the gilt market will limit her ability to deliver much of Labour’s agenda.’
Ms Reeves is scrambling to find ways to raise revenue to help fill a claimed £22 billion hole in the books and fund Labour’s policy commitments.
There had been conjecture that the Chancellor would reduce the pension contribution relief granted to those whose earnings exceeded the higher rate.
But that prospect has apparently been dropped amid fears that it would cause chaos in the civil service and NHS – where pensions are far more generous.
There are also allegations that the administration may not be able to reap the full benefits of several of the Labour Party’s main objectives.
This may put more pressure on Ms. Reeves to bolster her finances by enforcing stricter inheritance taxes, which would include drawing down pension funds.
According to Savanta study, almost 75% of businesses anticipate an increase in their workload, and 2/3 are concerned that this would negatively impact their capacity to function.
In an early sign of how extra borrowing will be spent, Transport Secretary Louise Haigh effectively confirmed that HS2 will run to Euston.
Ms Haigh slipped out the news as she insisted it would not ‘make sense’ to end the rail link at Old Oak Common in the London suburbs.
The multi-billion dollar renovation of Euston to make it an HS2 hub has caused anxiety.
Reeves is completely out of her depth, along with the rest of the Labour cabinet. You can’t keep borrowing because at some point it needs to be paid back. Ten years from now or even sooner there will not be enough tax receipts to pay the public sector pensions which are out of control and state pensions, then what are they going to do then?
Senior citizens are already seen by our administration as a drain on society. How is Labour going to respond? Declare mandatory euthanasia for seniors above 70 years of age in order to save money and free up homes.
Maybe the super-wealthy might band together to cover the pensioner’s winter fuel costs? However, there’s very little likelihood of that occurring because they would vanish into thin air.
Mind you, I doubt that Labour will even be here because I doubt they will last for the duration. They will eventually implode to the point where they will be unable to govern, and some might say that’s happening already.
Unfortunately, each candidate that wins the election is passed on an empty pot from the previous government. It’s a bit like having to take on someone else’s debt that they have no way of paying back, so they have to borrow and borrow and borrow, and then they hike taxes up from the peasants or just leaves them with nothing.
THE MONTHLY MOSQUITO 