Getty Images
The pound continued to fall on Thursday after UK government borrowing costs rose and concerns grew about public finances.
Sterling dropped as UK 10-year borrowing costs surged to their highest level since the 2008 financial crisis when the bank borrowing almost ground to a halt.
Economists have warned the rising costs could lead to further tax rises or cuts to spending plans as the government tries to meet its self-imposed borrowing target.
A spokesperson for the Treasury said: “No one should be under any doubt that meeting the fiscal rules is non-negotiable and the government will have an iron grip on the public finances.”
It added that the chancellor would “leave no stone unturned in her determination to deliver economic growth and fight for working people”.
The government said on Wednesday it would not say anything ahead of the official borrowing forecast from its independent forecaster due in March.
“I’m obviously not going to get ahead… it’s up to the OBR (Office for Budget Responsibility) to make their forecasts.”
“Having stability in the public finances is precursor to having economic stability and economic growth,” the Prime Minister’s official spokesman said.
Shadow chancellor Mel Stride claimed that the chancellor’s significant spending and borrowing plans from the Budget are “making it more expensive for the government to borrow”.
“We should be building a more resilient economy, not raising taxes to pay for fiscal incompetence,” he said in a post on X.
The warning comes after the cost of borrowing over 30 years hit its highest level for 27 years on Tuesday.
Meanwhile, the pound dropped by 0.9% to $1.226 against the dollar.
The pound typically rises when borrowing costs increase but economists said wider concerns about the strength of the UK economy had driven it lower.
The government generally spends more than it raises in tax. To fill this gap it borrows money, but that has to be paid back – with interest.
One of the ways it can borrow money is by selling financial products called bonds.
“It’s not good news,” Mohamed El-Erian, chief economic advisor at asset manager Allianz told the BBC’s Today programme.