Despite the promises, Labour may have to acknowledge more tax rises are needed | Heather Stewart
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It would be politically painful, but so are other options if Rachel Reeves is to improve UK’s broken public services. It seems unlikely Rachel Reeves had “cut back public spending plans” on her list of new year resolutions – but by the end of a rocky week, it was clear she has the red pen ready, if bond markets fail to settle down.
![[Heather Stewart]](https://i.guim.co.uk/img/uploads/2024/11/15/Heather_Stewart,_L.png?width=180&dpr=1&s=none&crop=none)
At one level, this makes perfect logical sense: the chancellor has promised not to raise taxes in the near future, after a whopping £40bn increase announced in October; and her fiscal rules are, as her chief secretary, Darren Jones, told MPs, “non-negotiable”.
Last week’s market moves, which drove 30-year gilt yields to their highest level since 1998, above 5%, probably had more to do with the chaos to come in the US than Reeves’s budget plans. But whatever the cause, if sustained, the jump in yields will push up the interest bill on the government’s vast debt pile. And that would jeopardise Reeves’s hopes of meeting her fiscal rules – specifically, the “current budget balance” one – by the end of the five-year forecast period.
There is no doubt that the UK’s fiscal position is unenviable. Even before the latest market panic, the Office for Budget Responsibility was expecting the Treasury to be spending more than £122bn on debt interest payments a year, by 2029-30. Mark Carney, the former governor of the Bank of England, once warned that the UK was “reliant on the kindness of strangers” (specifically, foreign investors) to fund its deficits – and therefore subject to the whims of the markets. It is all the more true post-pandemic, given the sharp upsurge in government debt.
