A new Labour government could raise extra money for investment from bond markets without causing a Liz Truss-style gilts crisis, according to fund managers. Shadow chancellor Rachel Reeves has promised to retain the Conservative government’s commitment that debt as a proportion of GDP must be on track to fall in five years if Labour wins the July 4 election.
However, investors say there is scope for modest increases in borrowing in 2025. “If the UK were to borrow a little bit more, would it get out of hand? No,” said Ales Koutny, head of international rates at Vanguard. Since the turmoil sparked by Truss subsided, “markets have been quite agnostic about high deficits”, he added. Investors may also be more tolerant of a relaxation of fiscal rules than Reeves suggests.