UK ‘moron premium’ prices as much as £7bn a 12 months as investor uncertainty drives up the Government’s borrowing invoice

Labour’s so-called ‘moron premium’ is costing Britain up to £7billion a year as investor uncertainty drives up the Government’s borrowing bill, analysis shows.

A think-tank study found the UK has faced ‘uniquely high borrowing costs’ since the election compared with the US and euro area.

Yields on UK bonds – the rate investors demand for lending to the Government – have risen 0.4 to 0.8 percentage points more than in other countries, the research found.

That adds £2billion to £7billion a year in extra costs, according to Left-wing think-tank the Institute for Public Policy Research (IPPR).

It said that ‘uncertainty about whether the Government will credibly deliver on its fiscal plans’ was partly to blame. Changes to the UK pension landscape were also a factor, the IPPR said.

But the think-tank said yesterday that there were indications the premium was now ‘showing signs of unwinding’.

Borrowing costs: Yields on UK bonds have risen 0.4 to 0.8 percentage points more than in other countries, recent research has found

Britain’s borrowing costs are the highest among the G7 group of advanced nations.

They have attracted what some experts described as a ‘moron premium’ – not a term used by the IPPR – since Liz Truss’s disastrous tax-cutting Budget in 2022.

Gilt yields fell after Rachel Reeves’s Budget last month, which doubled the so-called ‘headroom’ for meeting fiscal targets.

But they have since climbed back amid doubts about the Chancellor’s plans to achieve that goal.