Prime Minister Andy Burnham and Chancellor John Healey face a difficult first Budget on 28 October, with the cost of UK government borrowing hovering near its highest level in almost 30 years. Analysis of Debt Management Office data shows average gilt yields close to levels last seen in 1998, driven by persistent inflation, high borrowing, political instability and recent worries over the Iran war's impact on living costs, alongside fears of Bank of England and US interest rate rises. This matters because higher borrowing costs squeeze the public finances just as Burnham and Healey must decide how to fund spending pledges while sticking to fiscal rules.

The 30-year gilt yield currently stands at 5.78 per cent, the highest since 1998, while the 10-year yield is 5.14 per cent. The UK issued £303.7billion of gilts last financial year, double the 2016 figure and the second-highest on record after the pandemic years, and spent around £109billion on debt interest in 2025-26, near a 50-year high. Government borrowing also came in above forecast in July at £1.8billion, £2.3billion higher than the OBR expected, partly due to a £2billion rise in welfare spending, leaving Healey needing to balance welfare, defence spending and cost-of-living measures introduced by Burnham against Rachel Reeves's fiscal rules.