Starmer Chaos Sends Markets Into Panic As Debt Costs Soar

Have we ever had a government so careless with money? That’s the question swirling today after a series of moves that have left businesses struggling, investors spooked and taxpayers bracing for another punishing Budget.

Chancellor Rachel Reeves set the tone right after the election by approving £10billion of public sector pay rises without linking them to productivity. Then she piled £25billion onto company costs by increasing employers’ National Insurance. Thousands of firms couldn’t absorb it. Restaurants and pubs are collapsing, and the job market is dire.

Angela Rayner’s Employment Rights Bill is set to push business costs up by another £5billion. Critics warn it will mean even more lost jobs. She doesn’t appear concerned, reported the Express.

Meanwhile, energy secretary Ed Miliband is pouring tens of billions into his net zero push, which may win him applause among Labour supporters but leaves households with soaring bills.

As if that weren’t enough, Keir Starmer has managed to add another £5billion a year to Britain’s debt bill thanks to what has been described as a botched reshuffle. By shunting Reeves aside, he’s rattled bond markets, sending government borrowing costs surging. Taxpayers are the ones who will pay when the Chancellor presents the autumn Budget.

This morning, yields on 30-year gilts climbed to 5.73%, higher than the levels that helped bring down Liz Truss. They were already at a 27-year high before today’s leap. That rise pushes up the interest charged on new government bonds at the very moment the Bank of England needs to sell £300billion worth of gilts this year.

Thomas Pugh, an economist at RSM UK, warned this spike “could cost the Treasury an additional £4billion to £5billion by the time of the Budget.” He had already said Reeves needed £20billion in extra taxes but now thinks it’s closer to £25billion.

Markets have good reason to be nervous. Analysts say Starmer’s reshuffle has damaged Reeves’s authority, creating doubts over whether her much-publicised “iron-clad” fiscal rules will hold. Neil Wilson, investor strategist at Saxo Bank, said Labour could now abandon them altogether. “If the Treasury won’t break the rules, then perhaps Number 10 can?”

Wilson also said today’s gilt yields “is not a good look for the Labour government and underscores that there is little fiscal or economic credibility left.” He’s not trying to score political points. He’s genuinely alarmed, and others in the markets share his concerns.

With Reeves sidelined and Labour’s left-wing factions restless, many fear the party will dodge the tough choices needed to fix the nation’s finances. This Budget was always going to be difficult. Cutting disability benefits is politically toxic. Targeting already stretched public services will anger voters.

That leaves taxpayers. Campaigners are calling for higher taxes on the rich, but in reality it’s ordinary workers who usually end up shouldering the burden. And another round of tax grabs would only deepen the problem.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, warned that poorly planned tax rises could strangle growth, creating a “vicious circle” where the government keeps hiking taxes to fill the hole. Mark Dowding, chief investment officer at RBC BlueBay Asset Management, said Labour is missing a “credible plan” and driving the country “closer to a fiscal tipping point.”