𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Rachel Reeves has been warned of a damaging backlash if she is found to have lied to the public over the state of the economy. Nigel Green, CEO of global financial advisor firm deVere Group, suggested that gilt markets would react aggressively if it is determined that the Chancellor misled Parliament on the true status of the public finances, or if she is forced to resign. Opposition figures have claimed that she was not being truthful before presenting her Budget over the size of the fiscal “repair job” she faced.

Mr Green said: “When debt servicing costs are already this high, investors have very little tolerance for uncertainty. If confidence in fiscal leadership is damaged, gilts sell off quickly and the price of funding the state rises.” The specialist highlighted that markets have a “recent reference point”, as over the summer, a period of “visible political strain triggered abrupt moves” in UK assets.

Sterling weakened sharply and gilt yields jumped when investors “sensed hesitation and lack of unified backing at the top of government”.

No policy overhaul was required, Mr Green said, as the perception of instability alone was sufficient to reprice risk.

He added: “The summer showed how fast markets react when authority looks fragile.

“Investors saw uncertainty and immediately demanded a higher return for holding UK debt. That episode is fresh in bond managers’ minds.”

Now, the controversy over whether Ms Reeves was being straight with Brits “goes further by challenging the integrity of the fiscal story itself”.

Mr Green said: “Headroom tells investors how shock-resistant the budget is. When confidence in that number is weakened, yields rise to compensate.

“A resignation would intensify the reaction. Markets would immediately price uncertainty over succession, continuity of fiscal rules and the durability of tax and spending plans.

“Even if a replacement reaffirmed existing policy, the interlude alone would prompt higher borrowing costs, as seen repeatedly in the UK and abroad.

“Leadership disruption at the Treasury automatically injects doubt. Until there is clarity on who is in charge and whether policy holds, gilts carry an added premium.

“International bond investors can move capital easily. If the UK injects doubt into its fiscal framework, money will flow elsewhere.”

Higher government yields feed directly into mortgage rates, corporate borrowing costs and pension scheme valuations, Mr Green emphasised.

Financial conditions tighten rapidly, placing pressure on households and businesses already sensitive to borrowing costs, he added.

The Prime Minister, Sir Keir Starmer, is expected to defend Ms Reeves in a speech later today.

In media interviews on Sunday morning, the Chancellor said she “of course” did not lie to the public when she set out a gloomy economic picture at the beginning of November.

She told broadcasters: “Anyone who thinks that there was no repair job to be done on the public finances, I just don’t accept that.

“We needed to build more resilience, more headroom into our economy. That’s what I did, along with that investment in the NHS and cutting bills for families.”