A Cabinet minister has warned voters they risk turmoil in bond markets if they clear the path for MPs to topple Sir Keir Starmer after this week’s local elections.
Pat McFadden, the Work and Pensions Secretary, said a leadership contest would “inject more risk” into the country as the nation prepares to go to the polls on Thursday.
The Prime Minister faces a potential leadership challenge if Labour suffers heavy losses in council elections across England and in the devolved governments in Scotland and Wales.
The long-term cost of government borrowing rose to its highest level since 1998 on Tuesday over fears that Sir Keir could be replaced by a leader who loosens the public purse strings.
Mr McFadden, a key ally of the Prime Minister, acknowledged the Treasury was being forced to pay a “political premium” to borrow money amid the political upheaval.
“Markets don’t like uncertainty; they don’t like added risk. And I think we should all take that into account,” he told Times Radio.
He added that after Thursday’s elections, it was “important that we don’t inject more risk and uncertainty into the country, because you are seeing a lot of commentary around a level of risk and uncertainty in the comments on these borrowing costs”.
Government borrowing costs fell in early trading on Wednesday, having been pushed higher in recent months by both the war in the Middle East and the UK’s political turmoil.
The yield on 10-year gilts, as UK bonds are known, dropped by 0.06 percentage points but remains at 5pc, close to its highest level since 2008. Longer-term 30-year gilt yields also fell back from their highest level in 28 years.
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