Elon Musk is not a threat: what really scares the UK government in the economic crisis
Kyiv • UNN
The cost of 10-year borrowing in the UK has reached its highest level since the 2008 financial crisis. The government may be forced to resort to austerity due to high public debt service costs.
UK Prime Minister Keir Starmer and his Finance Minister Rachel Reeves have faced criticism as the pound has collapsed and the cost of 10-year borrowing has reached its highest level since the 2008 financial crisis.
This was reported by Politico, UNN.
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There is reportedly a fear that their new center-left administration, which promised to fix public services and boost economic growth after the turmoil of the Conservative rule, has now strayed far from its driving purpose, with populists like Musk applying pressure.
The rise in borrowing costs reflects persistently high inflation, potential tariffs expected under Donald Trump's presidency, and weak growth in the UK. Other countries are also seeing their currencies fall against the dollar. However, the UK is in a particularly difficult position.
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If Chancellor of the Exchequer Rachel Reeves has to spend more on servicing the national debt, she will have less money for other Labor priorities. Economists predict that the government may have to take austerity measures to ensure that it meets its financial obligations. Rachel Reeves has promised not to raise taxes, but with the high cost of servicing the national debt, the government may be forced to cut spending on other priorities.
Despite growing concerns, some in the Labor Party believe that panic over the economic situation is premature and that the changes in the market may be temporary. Nevertheless, the government does not have much choice and, according to experts, may be forced to cut spending or revise its investment plans.
In the coming months, when a new economic forecast is released in March, the UK government is likely to make important decisions about its fiscal policy.
British financier Jim O'Neill, who advises Reeves, said that while 80% of the volatility in the bond market is due to external factors, the remaining 20% is a signal from the markets that they do not believe in Labor's plans to stabilize and grow the economy.
In fact, the situation on the bond market is subject to change, and it is not worth building an economic strategy on the basis of weekly fluctuations in bond yields. However, there are other opinions among Labor MPs: some believe that the government should take market forecasts much more seriously and be prepared for possible negative consequences.