The UK is facing criticism over the falling pound and rising government borrowing costs. The currency fell to $1.21 on Monday, its lowest level since November 2023, while one measure of the rate at which the UK government can borrow money hit its highest level since 2008. Borrowing costs are rising for many countries across the world, but some have argued that decisions made in the latest budget appear to have made the UK more vulnerable.
Despite this, Prime Minister Sir Keir Starmer has given Chancellor Rachel Reeves his full confidence. The Chancellor has remained central to the Labour government and has been projected as a safe pair of hands. However, her first Budget in October has subsequently been feared to damage the country’s economy and growth. Senior members of the government have since told the BBC that Prime Minister Starmer will continue to work with Reeves for the whole of this term.
While confronted at a press conference on Reeves’ future, Starmer did not publicly confirm whether Reeves would still be in post by the next election. The conservative side has pointed stronger criticism at Reeves as they continue to question her ability. Conservative leader Kemi Badenoch said that the markets were in turmoil, and business confidence had crashed, but the Chancellor was nowhere to be seen.
The rising borrowing costs will have knock-on effects on the government’s tax and spending plans as they will have to pay more interest to finance their existing debt. This leaves less to spend on public services and investment. Some experts claim that investors are reacting to the re-election of former US President Donald Trump and his talk of tariffs. The concern is that this will lead to inflation being more persistent than previously thought, and thus, interest rates will not come down as quickly as expected, both in the US and elsewhere
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