Britain uncovered to power shock by Reeves ‘spending like a drunken sailor’ as borrowing prices hit highest since 2008 disaster and market vigilantes circle

Britain came under attack on the global bond markets yesterday as UK borrowing costs soared to an 18-year high – sparking warnings Labour cannot afford to help families facing a £2,000 energy shock.

As Rachel Reeves was accused of ‘spending like a drunken sailor’, the Office for National Statistics said the state borrowed another £14.3billion last month, some £6billion more than expected.

That was the largest February deficit on record outside the pandemic – and came before conflict in the Middle East sent oil and gas prices soaring and sparked fears ‘Trumpflation’ will flatten the economy.

The grim figures came as ten-year gilt yields – a key measure of how much it costs the Government to borrow – hit 5 per cent for the first time since just before the collapse of Lehman Brothers in the 2008 financial crisis.

The shocking milestone sparked warnings that ‘the bond vigilantes are after the UK once more’, casting doubt over if the Chancellor can afford to help households facing a £332 rise in energy bills to almost £2,000 this summer.

Families also face higher mortgage costs, with the Bank of England expected to raise interest rates three times in the next six months to 4.5 per cent to desperately combat inflation.

Britain is the only country in the G7 with a ten-year bond yield of over 5 per cent – making a mockery of Sir Keir Starmer’s claims to have made the UK ‘better prepared for a more volatile world’.

Higher borrowing costs are a major headache for Ms Reeves as they push up the cost of servicing Britain’s mammoth £2.9trillion debt pile.

Fire and plumes of smoke rise from an oil facility in Fujairah, United Arab Emirates last week as the economic fallout from the Iran war begins to bite families in Britain

As Rachel Reeves was accused of ‘spending like a drunken sailor’, the Office for National Statistics said the state borrowed another £14.3billion last month, some £6billion more than expected

Rises in bond yields also feed through to more expensive mortgages and business loans. In comments echoed by the PM’s spokesman, Treasury minister James Murray insisted Labour has the ‘right economic plan’, saying: ‘Because of the choices we made before the conflict in the Middle East began, we are better prepared for a more volatile world.’

But Shadow Chancellor Sir Mel Stride said: ‘What planet are Labour on? With an external economic shock on its way from the war in the Middle East, the fragility of our economy is about to be exposed.’

He said ‘borrowing keeps climbing’ despite Labour’s tax hikes, adding: ‘Labour are spending like drunken sailors on welfare. These were political choices, not global inevitabilities.’

Tory leader Kemi Badenoch said: ‘What is Rachel Reeves doing? She maxed out the nation’s credit card with record borrowing and runaway welfare spending. Now Britain is more exposed to global shocks, and our debt costs are spiking.’ The ten-year gilt yield rose as high as 5.02 per cent yesterday – putting UK bonds on course for their worst month since Liz Truss was in power.

While bond yields have not risen quite so fast this month, they are higher than they were back then, with the Government now paying more to borrow than at any time since Gordon Brown was PM.

The surge in borrowing costs underlines just how hard it will be for Labour to fund a cost-of-living bailout as investors fret about how the stuttering economy can withstand a fresh inflation surge and higher interest rates.

Simon French, chief economist and head of research at City investment bank Panmure Liberum, said Britain was already paying a so-called ‘moron premium’ to borrow because of economic mismanagement.

He warned ‘an expensive bailout of household and business energy bills’ would push borrowing costs even higher and sounded the alarm over higher spending and borrowing should Angela Rayner replace Sir Keir in No 10.

It also came as the FTSE 100 slumped by 145 points to close below the 10,000-mark for the first time since the start of the year.