Pressure mounts on Reeves as Starmer refuses to guarantee future of her job
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Rachel Reeves is under intense pressure after Sir Keir Starmer refused to guarantee her long-term future in No 11 as the value of the pound fell and Government borrowing costs remained high. The Prime Minister said the Chancellor had his “full confidence” and was doing a “fantastic job” but declined to say she would remain in No 11 for the duration of the parliament.
Sir Keir acknowledged it will take time to turn the economy around as Ms Reeves faces the prospect of rising borrowing costs forcing her to slash spending or hike taxes to balance the books. The pound fell to a fresh 14-month low on Monday, slumping another 0.6% to 1.21 US dollars after last week hitting its lowest level against the dollar since November 2023.
UK government bonds – also known as gilts – continued to see 10-year yields hit fresh highs not seen since 2008, at 4.9%. The yield on 30-year gilts also hit new 27-year highs, up five basis points at 5.5% at one stage in early trading before easing back to settle at around 5.4%.
Yields are a key indicator of market confidence, moving inversely to bond prices. They rise when investors are less willing to own the debt, meaning they will pay a lower price for the bonds. Answering questions following a speech in London the Prime Minister stressed that the Government would meet its “fiscal rules” – including requiring day-to-day spending to be met from revenues rather than further borrowing.
