Britain’s Chancellor of the Exchequer, Rachel Reeves, has pledged to maintain strict control over public finances as rising long-term interest rates threaten to worsen the country’s already mounting debt burden.
In a statement released Wednesday, Reeves announced that her next budget speech will be delivered on November 26, and signalled a continued focus on fiscal restraint.
“We must bring inflation and borrowing costs down by keeping a tight grip on day-to-day spending through our non-negotiable fiscal rules,” she said.
Her comments come amid mounting market pressure. The British pound dropped sharply on Tuesday, while yields on 30-year UK government bonds surged to levels not seen since 1998, reflecting growing investor concern about the sustainability of public debt not just in the UK, but across major global economies.
Reeves Faces Political, Market Pressures
The UK economy has faced sluggish growth since Labour came to power last year, with Reeves introducing a mix of tax increases and spending cuts shortly after the general election victory. Some of those austerity-driven measures were later reversed following intense backlash, weakening her political standing.
Tensions within the government appeared to resurface this week, after Prime Minister Keir Starmer promoted Treasury deputy Darren Jones to Chief Secretary, a move that has fueled fresh speculation about Reeves’ future in the cabinet.
Despite the uncertainty, Reeves has maintained that her fiscal approach is focused on balancing the books, ensuring tax revenues cover routine government expenditures, while borrowing is reserved strictly for investment.
More Tax Hikes Likely
Markets and analysts are bracing for more tax increases and spending cuts in the upcoming budget.
“Further tax hikes are almost certain in order to plug the black hole in the public coffers,” said Matthew Ryan, Head of Market Strategy at financial services firm Ebury. “But that alone won’t wash, with investors baying for spending cuts, wary of a perpetual tax trap that could choke the life out of the UK economy.”
According to the Resolution Foundation, a leading UK think tank, soaring bond yields have already added over £3 billion ($4 billion) to annual interest payments on government debt. Meanwhile, recent Labour U-turns such as rolling back cuts to social care have added another £6 billion to the public spending bill.
“The Chancellor has officially fired the starting pistol on the countdown to one of the toughest second budgets in living memory,” said the Foundation’s chief executive Ruth Curtice.
A separate analysis by the National Institute of Economic and Social Research estimates that the government will need to raise more than £41 billion annually by 2030 just to stabilise the public finances.
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