UK gilt yields surged to their highest levels in decades on renewed market turmoil, threatening to add around £6 billion to Britain's debt interest bill and complicating Chancellor John Healey's Budget arithmetic. The sell-off makes it harder to fund defence spending increases and other commitments championed by Andy Burnham, fuelling expectations that middle earners will face further tax rises on top of the £75 billion already imposed under his predecessor Rachel Reeves. A report from the Resolution Foundation, closely watched by Labour figures, argued UK taxpayers are relatively lightly taxed compared with other rich nations and could bear higher rates to share the burden of increased defence spending.

Ten-year gilt yields climbed past 5.25 per cent, the highest since the 2008 financial crisis, while 30-year yields exceeded 5.9 per cent for the first time since 1998, before easing back slightly. The turmoil, partly driven by the ongoing Iran conflict pushing oil towards $93 a barrel, has left UK borrowing costs higher than any other G7 nation. Healey already faces a £5 billion gap for defence investment, with economists warning that Burnham's pledges on council housing and social care could require £10-50 billion in additional spending, making next month's Budget a critical test for markets. The Conservatives blamed Labour's "reckless spending" for the rising costs, while pressure also builds from the left for even greater expenditure.