Healey warned to limit Budget borrowing amid bond sell-off

Allies of the new chancellor say the government intends to stay “well within” Labour’s fiscal rules, according to the Financial Times. The warning comes after a sell-off in UK government bonds, increasing pressure to keep additional borrowing under control.

The immediate instruments affected are UK gilts and sterling, with the fiscal stance also relevant to UK banks and domestically exposed equities through funding costs and economic conditions. A tighter borrowing plan could support confidence in the gilt market, while weaker fiscal headroom could constrain spending plans.

The Budget’s final borrowing figures and the market’s response will be the key next developments. The open issue is whether the government can preserve its policy objectives while delivering enough restraint to prevent further pressure on bond yields.