Home›Forex›Central Banks›Burnham reduces VAT on electricity bills, rattling UK…

Burnham reduces VAT on electricity bills, rattling UK gilt markets

UK 10-year gilt yields have moved back above 5.0% as investors look for potential flexibility around existing fiscal rules.

Reported · Written up by our desk · Central Banks

Andy Burnham, who became the UK’s prime minister, has announced a 5% reduction in VAT on electricity bills and placed household cost-of-living support at the center of his agenda, according to Action Forex. The same article says markets are now watching how the new government will handle fiscal policy, after Burnham signaled he would use “any flexibility” within the existing fiscal rules set by Keir Starmer and ousted chancellor Rachel Reeves.

Action Forex also notes that investors have reacted negatively to the idea that the fiscal rules could be interpreted with more room for maneuver. It adds that UK bond markets are not impressed, with gilt yields spiking to May highs during the energy crisis period.

The article says the 10-year gilt yield is back above 5.0%, and that the UK has the highest yield among G7 countries. It warns this puts the country at greater risk if there is a panic-driven selloff in government debt.

On the personnel front, Action Forex reports some relief tied to Burnham appointing John Healey as finance minister, replacing Reeves. The article further frames Healey’s background as a counterbalance while investors await how Burnham’s policies translate into the government’s borrowing plan.

More like this

Sources