Britain’s debt chief has warned both Rishi Sunak and Sir Keir Starmer against promising costly policies that will increase borrowing in their election manifestos.
Sir Robert Steman issued the warning amid rising global borrowing costs, with Britain expected to spend £95 billion to finance the national debt this year, which currently stands at around £2.7 trillion.
“In a world where we have debt to sell, policy making cannot be separated from market reality,” he said.
His comments come after former Prime Minister Liz Truss sparked economic fallout in late 2022 after announcing a wave of unfunded tax cuts in her mini-Budget.
He said part of Truss’s mistake was failing to recognize conditions in financial markets, where global investors were already charging governments more to borrow even before they unveiled their plans.
In an interview with the Financial Times, Sir Robert urged policymakers to be cautious: “Don’t fool yourselves into thinking you can develop policy in a vacuum without taking the market into account.”
Right now, the government has to pay an interest rate of about 3.7% on its 10-year bonds, down from last summer’s high of 4.7% — but well above the pandemic-era low of less than 0.1%.