Rachel Reeves is powerless to stop the next financial crisis | Personal Finance | Finance

The cost of living crisis is back.

The UK is plunging headlong into another crippling financial crisis and, of course, it’s the working people of Britain who will end up footing the bill.

For decades, we have lurched from one once-in-a-generation crisis to another, slowly draining an entire generation of any financial prosperity and now it’s happening all over again – and the most worrying thing is that there’s very little Rachel Reeves will be able to do to stop it.

On Friday morning, it was confirmed that British borrowing costs have soared to their highest since 2008, with fears growing inflation will soar and an ever-increasing likelihood interest rates will rise too. UK government gilts have sharply priced up to their highest since the 2008 financial crash.

Even before the war began, the UK had the highest government borrowing costs of any developed G7 nation, according to CNBC, and now it’s got even worse.

Rachel Reeves must feel cursed. It’s fair to say that her tenure has not been without due criticism, such as the messy and unpopular change to Winter Fuel Payments, the reduction to Cash ISA savings limits and the continued choice to freeze the tax-free Personal Allowance while, at the same time, increasing inheritance tax for farmers.

But the Chancellor did inherit an incredibly unstable post-Covid, post-Brexit, post Ukraine economy that in turn had been inherited from a post-2008 crash, post-austerity economy. It’s been one battle after another for the UK economy and everyone living here for years on end accepts the only award we’re in line for is most doomed financial outlook.

America’s invasion of Iran, with seemingly no thought to the knock-on effect on the global economy thanks to the blocking of the Strait of Hormuz, came after Trump’s tariffing of the entire global economy, with seemingly no thought to the economic prospects of the US, its ‘allies’ or anyone else.

Reeves says she has committed to bringing day-to-day government spending in line with a level where it can be funded by tax revenues rather than borrowing, with her own imposed ‘fiscal rules’ also dictating that public debt must be falling as a share of economic output by the end of the decade. The bond market has actually been in favour of this, with rumours of her departure last year triggering a gilts sell-off.

But there is very little she can do to stop this spiralling out of control and missing every economic target so long as Trump keeps firing off literal and metaphorical missiles and spiking prices, spiralling inflation and causing fiscal chaos.

When those economic targets are missed thanks to Trump’s war in the Middle East, it means fuel duty won’t get cut. Personal Allowance freezes won’t get unfrozen. Cost of living payments won’t increase. If anything, it means more tax rises on savings, on inheritance tax and on income tax.

And, ultimately, whether it’s at the pumps, on supermarket shelves or in our pay packets, the British public are once again picking up the tab.