Capital Economy, Business and Finance
The two headlines from the UK’s Conservative Party conference this week are likely to be Rishi Sunak’s cancellation of the Birmingham-to-Manchester HS2 rail line (more on this tomorrow), and his chancellor’s warning that he can’t afford any tax cuts. Both look like political own-goals but both are easier to explain in light of 30-year UK bond yields, which reached 5.05 per cent today, higher than at any point in the past 20 years. That makes government borrowing even more expensive than it already is. The Treasury spent £110 billion on debt interest last year – more than the UK did on education – and the BBC says stubbornly high rates mean Jeremy Hunt will have to put aside an extra £23 billion for future debt service payments in his autumn financial statement. Borrowing costs are high for governments everywhere, including the US, Germany and throughout the developing world. They’re just especially painful for a weary UK government that has additionally chosen to stunt growth with Brexit.
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