Investor concern has risen about the extent of UK government borrowing, feeding a sell-off in gilts since the autumn budget. Any sign that Reeves might be willing to bend her fiscal rules could further spook investors.
The UK’s 10-year borrowing costs rose to a 16-year high in January, at just over 4.9 per cent, before falling back slightly. This has reduced the chancellor’s wriggle room against her self-imposed fiscal rules.
ING’s UK economist James Smith says the government’s headroom has “fully evaporated” and “tax rises will be needed later this year to plug the gap”.
He added that the statement “will emphasise that when it comes to day-to-day spending, there’s not enough cash to go around”.
