UK long-term borrowing costs highest since 1998 ahead of October Budget

Long-term government borrowing costs have risen to a 28-year high, putting further pressure on Prime Minister Andy Burnham ahead of his first Budget next month.

The yield on a 30-year gilt — a loan to the British government — rose to 5.89%, the highest since 1998.

The effective cost of borrowing for governments across the globe has continued to rise this morning with new multi-decade highs in market interest rates.

The moves reflect concerns about inflation arising from the ongoing Iran war, competition from major tech firms for long-term borrowing, and concerns about state borrowing levels.

All of those factors will make the Budget process trickier for Burnham, who will face MPs on Tuesday for the first time as prime minister , and his Chancellor John Healey.

Higher borrowing costs will reduce the amount of headroom the government has against its self-imposed fiscal rules, limiting the amount Healey can spend on consumer-friendly measures to ease the cost of living.

Downing Street said fiscal discipline is the "bedrock" of Britain's economic stability and national security.

But a spokesperson for the prime minister refused to comment directly on the rise in borrowing costs.