UK's higher borrowing costs compared with major countries 'may be coming to an end'

[Poor Part]

UK's Borrowing Costs May Be Coming Down, Think Tank Suggests

A growing consensus in financial markets that the UK will stick to its fiscal plans may be bringing an end to the country's premium for borrowing money. The Institute for Public Policy Research (IPPR), a left-leaning thinktank, says that the government's announcement of a £22bn increase in financial headroom by 2030 has begun to reassure bond markets about Labour's fiscal approach.

For years, UK government bonds have traded at a higher premium than those in major peer countries, including the US and the eurozone. This has resulted in higher borrowing costs for taxpayers, with the country currently paying up to £7bn a year more on its debt than its peers. However, recent market trends suggest that this trend may be coming to an end.

According to IPPR, the UK's economy is actually stronger than those of countries with lower borrowing costs, with a debt-to-GDP ratio of 101% compared to 122% in the US and 237% in Japan. The government has also committed to halving its borrowing each year by the end of this parliament.

The problem, however, is that bond traders have been skeptical about the UK's ability to keep to its fiscal plans. The previous mini-budget under Liz Truss's administration "showed how quickly a UK government could bypass the fiscal framework", IPPR said. This has led to a "lack of trust in stated fiscal policy" among markets.

However, recent market developments suggest that this may be changing. The autumn budget has prompted the UK premium against the eurozone to almost halve, with markets showing growing confidence in Labour's fiscal approach. According to senior economist William Ellis at IPPR, sticking to its fiscal plans could save the exchequer billions and free up fiscal space in the future.

One way to achieve this would be for the Bank of England to pause its sale of government bonds after "selling them at a record pace". Carsten Jung, associate director for economic policy at IPPR, argues that the central bank needs to take action to ease pressure on the gilt market. "The Bank of England needs to pull its weight," he said. "Actively selling government bonds is adding unnecessary pressure to the gilt market. It should stop – just as every other major central bank has."

 

[Inter]

The UK's borrowing costs have been kinda high for ages, but I think things might be changing . This think tank is saying that Labour's fiscal plans are starting to gain some trust from investors , and that means lower borrowing costs for the taxpayer . It makes sense, if the UK economy is actually stronger than other countries' economies . But, I still wonder why the government's previous mini-budget created so much doubt in markets . Maybe it's time for the Bank of England to calm down on selling government bonds ? It seems like a pretty simple solution to ease pressure on the gilt market .

 

[Obedi]

I'm starting to think that all this fuss about UK's borrowing costs being high might be overblown . I mean, if a think tank like IPPR thinks that Labour's fiscal approach is starting to reassure bond markets, maybe there's some truth to it? And the fact that their debt-to-GDP ratio is actually lower than Japan's (who would've thought, right?) doesn't hurt either . Plus, with the government committing to halving borrowing each year, that sounds like a solid plan to me . Now, I'm not saying that bond traders won't still have some reservations, but if markets are showing growing confidence in Labour's approach, maybe we should give them some credit?

 

[Create]

I'm surprised that it's taking them so long to realize that their austerity measures aren't actually working out . I mean, who wouldn't want to borrow money at a lower interest rate? It's not like they've been selling off everything of value in the UK or anything . Anyway, good for Labour for sticking to their guns and trying to make fiscal sense of things . Maybe it's about time the market starts trusting them .

 

[Heavy Chicken Que]

I'm kinda thinking that if the UK can keep to its fiscal plans, we might see a reduction in borrowing costs . The IPPR's suggestion makes sense - the UK economy is actually stronger than some of our peer countries, so it shouldn't be a big deal if they stick to their spending plan. And think about it, if the Bank of England can stop selling bonds at such a high pace, that'd definitely help ease pressure on the gilt market . Maybe we'll see a more normal interest rate soon? It's all about finding middle ground between fiscal responsibility and economic growth

 

[Fair Fox]

I'm kinda curious about this, what's up with UK government bonds trading at a higher premium than others? Like, why would bond traders be skeptical of Labour's fiscal approach when it sounds pretty solid to me? And isn't the debt-to-GDP ratio thing a good point too? I mean, if the UK's economy is stronger, shouldn't that give 'em more wiggle room with their borrowing costs?

I'm not sure about this idea of the Bank of England selling government bonds at a record pace though. Wouldn't that just make things worse for the gilt market? Maybe they should focus on easing pressure instead? I don't know, it's all a bit confusing to me. Can someone explain why this is happening and what the implications are?

 

[Bored]

omg i'm so down for this! finally some good news about the uk's borrowing costs it's been a nightmare watching our taxes go up and up just because of higher borrowing costs. but if the ippr is right, it could be a game changer. 101% debt to gdp ratio isn't too shabby, tbh and sticking to those fiscal plans could save us billions in the long run. btw, can we pls get the boe to stop selling government bonds at such a record pace? carsten jung is speaking truth

 

[Light]

so this is good news for uk taxpayers , right? borrowing costs are gonna be lower, that means we pay less interest on our debt, so we get more money back in the long run . but how come bond traders were skeptical about labour's fiscal plans in the first place? didn't they think they'd mess things up like the liz truss government did . also, what's with the bank of england selling bonds at a record pace? shouldn't they be helping out instead of adding pressure to the market

 

[Children of t]

I'm not sure I'd get too excited about the UK's borrowing costs coming down . Like, let's be real, £7bn a year may seem like a lot, but when you're dealing with trillions in debt, it's just a drop in the ocean . And have we seen any actual progress on reducing that debt? Not so much . The IPPR thinktank might say that the UK's economy is stronger than others, but what about all those pension funds and other investors who are still worried sick about the whole thing? They're not exactly going to start cheering for a lower borrowing cost anytime soon .

 

[Average Alpaca]

idk about this news ... think tank says UK's borrowing costs might be coming down, but how can we trust them? they're like, left-leaning and all that jazz ... what makes them say the economy is stronger than countries with lower debt-to-GDP ratios? shouldn't we get some numbers to back it up? and what about the mini-budget under Liz Truss? didn't that show how unstable the UK government can be? also, if bond traders are getting more confident in Labour's fiscal approach, doesn't that mean they're just waiting for something to go wrong again? ... gotta see some more info before i believe it

 

[Yucky Yak]

I think it's about time our gov pays less for borrowing and not adds extra burden on taxpayers Like, we all want a more stable economy, but come on, £7bn is a lot of cash The IPPR thinktank has been saying this for ages, that the UK's got some serious economic muscle under the hood And if they can stick to their fiscal plans, we might actually start seeing some real savings Not just a bunch of empty promises

 

[Nutty Newt]

I think it's about time we saw a decrease in those UK borrowing costs, tbh? It makes sense that with Labour's fiscal plans being taken more seriously by markets, they'd start to lose some of that extra premium. The fact that the IPPR is saying the UK economy is actually stronger than our peer countries is pretty interesting too. I mean, who knew? Anyway, if the Bank of England can just ease up on selling those government bonds a bit, that'd be a win for everyone. Less pressure on the gilt market = lower borrowing costs for taxpayers! That's gotta be a good thing, right?

 

[Crazy Copperhead]

I'm not surprised to see borrowing costs coming down in the UK, mate! It's been a long time coming, but I reckon Labour's fiscal plans are finally starting to look solid. The economy is doing alright, and debt-to-GDP ratio isn't that bad considering everyone else is struggling more. Still, it's about time something changed – all these years of high borrowing costs have been a real pain for taxpayers.

I think what's happened is markets are finally taking Labour at their word, rather than assuming they'd be like the last government and just go rogue. The autumn budget was a good step in that direction, and I'm glad to see the premium against eurozone bonds coming down.

Of course, the Bank of England still has some work to do – pausing those bond sales would help ease pressure on the market. It's about time they take a more active role, eh? Carsten Jung's spot on there – the BoE should be selling more government bonds, not less!