{"id":271825,"date":"2025-11-19T15:12:17","date_gmt":"2025-11-19T15:12:17","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/271825\/"},"modified":"2025-11-19T15:12:17","modified_gmt":"2025-11-19T15:12:17","slug":"rachel-reeves-nightmare-as-markets-may-tear-up-budget-and-force-her-to-re-do-it-personal-finance-finance","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/271825\/","title":{"rendered":"Rachel Reeves nightmare as markets may tear up Budget and force her to re-do it | Personal Finance | Finance"},"content":{"rendered":"

Rachel Reeves has dug herself into a deep hole<\/a>, and there\u2019s no way out. Her Budget is just a week away and she still doesn\u2019t seem to know what\u2019s in it. After her U-turn on income tax, we\u2019re now braced for a \u201csmorgasbord\u201d of smaller tax rises that could do even more damage to an economy crying out for stability<\/a>.<\/p>\n

Her mismanagement has driven up inflation, destroyed jobs, killed growth and forced up borrowing costs. Ten-year gilt yields are climbing again<\/a>, lifting the cost of servicing our already swollen debts. Britain is paying what traders bluntly call a \u201cmoron premium\u201d as global investors demand more interest to lend us money, because they think we\u2019re run by, well, morons.<\/p>\n

Reeves has to get every line of this Budget right on November 26, yet her track record suggests she\u2019ll get it all wrong. And if she does, the bond market could force her back to the despatch box for a second go.<\/p>\n

That\u2019s the nightmare scenario set out by a senior City investor who, like most of us, can\u2019t see how she pulls this off.<\/p>\n

The warning comes from bond market manager David Zahn at Franklin Templeton. He fears the Budget could backfire with gilt yields spiking as the damage becomes clear. Should that happen, the all-powerful bond market may force the Chancellor to write a \u201csecondary budget\u201d to reverse the damage. If the market throws a tantrum, she may have no choice but to do it all over again in December. Oh joy.<\/p>\n

Zahn says yields on 10-year and 30-year gilts heading towards 6% would be \u201cunsustainable\u201d, risking a \u201cdeath spiral\u201d of soaring borrowing costs. So that’s the number to watch. Today, yields stand at just over 4.55% and 5.38%. We\u2019re not there yet, but we\u2019re uncomfortably close.<\/p>\n

Reeves won\u2019t push through spending cuts and won\u2019t touch the big taxes either, because Labour back benchers will rebel. This leaves her with no credible plan to impress investors. As Zahn put it, unless she cuts spending and delivers \u201creal tax increases\u201d, the markets won\u2019t believe she\u2019s fixing Britain\u2019s finances, and may panic as a result.<\/p>\n

Estimates suggest she faces a \u00a330billion hole in the Budget. She also needs to rebuild fiscal headroom, ideally to \u201cnorth of \u00a320billion\u201d, to protect against future shocks. That’s an awful lot of money. Even if she survives this year, Zahn fears another nightmare in 2026 as she comes back for yet more tax because her sums still won\u2019t add up.<\/p>\n

We\u2019ll find out soon enough whether Zahn is proved right. It would be the ultimate humiliation for Reeves, but it can\u2019t be ruled out.<\/p>\n

None of us will forget the meltdown in September 2022, when Liz Truss and Kwasi Kwarteng triggered a bond market revolt with their unfunded tax cuts. Gilt yields shot up, the pound plunged and mortgage<\/a> rates surged. Truss was gone after just 49 days.<\/p>\n

Britain is now in an even more precarious position. Borrowing is huge. Spending is out of control. Yet the moment ministers hint at cuts, their own MPs erupt. The party’s army of economic illiterates would rather moan about being \u201cin hock to the bond market\u201d than face up to the real problem<\/a>.<\/p>\n

Reeves must now take her chances with the traders who hold the nation\u2019s credit score in their hands. So will the rest of us. If Reeves is forced to deliver a second Budget before the ink dries on the first, it\u2019ll be game over for her, and possibly for Keir Starmer too<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Rachel Reeves has dug herself into a deep hole, and there\u2019s no way out. Her Budget is just…\n","protected":false},"author":2,"featured_media":271826,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[4185,15836,84,111827,1294,59,1445,56,53122,54,55],"class_list":{"0":"post-271825","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-bond-market","9":"tag-budget-2025","10":"tag-business","11":"tag-economic-mismanagement","12":"tag-economy","13":"tag-gb","14":"tag-rachel-reeves","15":"tag-uk","16":"tag-uk-budget","17":"tag-united-kingdom","18":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/271825","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=271825"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/271825\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/271826"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=271825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=271825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=271825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}