Transcription
Some pretty extraordinary things happening, actually. Uh, when you look at financial markets, uh, and particularly borrowing costs. This is kind of the time of year where, when things yo-yo around, no one's entirely sure, uh, why it's happening. In this case, that certainly, uh, is true.
Um, because the 30-year government bond yield, which is basically the measure of how much investors out there in the market are charging the UK government, uh, for its borrowing, that has risen to the highest level that we've seen since 1998. Going back a long, long way, uh, into the past, actually. You know, it's around the time just after Oasis released "Be Here Now" if you want a little bit of historical reference. But nonetheless, that's at the highest level in a long time. Um, that has caused some concerns because, obviously, the higher that line is, the more the government has to pay in its interest costs. And it's also sometimes a sign that people are concerned about UK economic policy.
And if you compare the UK and that level of interest rates with other countries, uh, in the G7, so these lines are basically just showing you how high the maximum and minimum level is, uh, in the G7. You see something quite interesting here. Okay, so the higher this is, the higher those interest rates are, which, all else equal, is often a bad thing because it means you're paying, uh, higher interest, uh, rates and interest-free payments. The striking thing to note here is, look, a few years ago, the UK, that red line there, was kind of in the middle of the pack. So, very similar kind of to, to the medium level of where other rich countries were.
But then something changed. And that thing that changed was around here, 2022, about the time of the mini-budget. You remember, obviously, what happened? Those interest rates went through the roof. Everyone was concerned about what Liz Truss, Kwasi Kwarteng were doing. And as a result, UK interest rates went up very sharply. What's striking, if you look at that red line and where it is in relation to the rest, is it stayed high thereafter. In other words, a lot of people looked at the UK and they thought, "We're just concerned about you more broadly." And certainly since Labour were elected, the red line, the UK's interest rates have gone above where the rest of the G7 is. In other words, we have become something of an outlier.
So, people are concerned about the UK, but those rates are going up for everyone. And that could mean all sorts of things. It could mean just people getting concerned about the amount of government debt that's been issued. And it's kind of understandable for them to be concerned because if you look at the comparison between private sector and public debt, so one of these lines is private sector, one is public sector. They were more or less rising in lockstep with each other, uh, in previous years. But since the financial crisis, private sector debt has gone up quite a bit, about 200%. But look at what's happened to public sector. So, government debt, that's gone up way faster than the private sector. Basically, governments are asking for lots of money, and it's not entirely clear where they're going to get up get it. Look, that's up by 400% since 2000. That's up by 200, 200%. And so, a lot of extra government debt has been issued. No one's quite sure who's actually going to pay for it.
And then the final thing that's just worth bearing in mind is there is real concern about just kind of policy uncertainty, as you might call it. And if you look at this, these lines are just showing you how concerned people are, how unsure they are about what's happening with government policy. You had the US election, obviously Donald Trump coming in, and look at what happens to these lines. The amount of policy uncertainty, particularly about trade, that's the red line there, has gone up to unprecedented levels. And what does that all spell? That spells investors being concerned. And when they're concerned, maybe they're less likely to, to invest more money, uh, in your country.
I'm going to show you one final chart. I just said that was the final one, but I've got one final one because playing into this at the same time is what's going on with interest rates. Not the interest rates the government's paying, but the interest rates that all of us are paying in terms of Bank of England borrowing rates. And not that long ago, they remember they went up to 5 and a quarter percent. They've started to come down, haven't they? But not that long ago, they were expected to go down relatively quickly in the next, uh, few years. That's the forecast. What markets think is going to happen in the next few years. Here is where it now thinks interest rates are going. So, they're not going down as quickly.
So, put all of that together, and it starts to just about explain what happened with UK interest rates, those overall government UK interest rates. But even so, it's a little bit unnerving, and it plays into that drama about what Rachel Reeves is going to do when it comes to the budget.