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Rachel Reeves has been challenged with an unnecessary dilemma — and it’s the Bank of England that created it.

This morning (September 2, 2025), The Guardian reported that government borrowing costs have hit their highest level in 27 years; Reeves has nothing to do with it.

But the Treasury will have to pay more to service the debt, after the interest rate on 30-year UK bonds spiked to 5.68 per cent.

That means real money — billions of pounds — will flow out of public services and into the pockets of wealthy bondholders.

It means fewer nurses and doctors, less support for people in poverty, and more austerity at a time when ordinary households are already stretched to breaking-point.

But here’s the scandal: the bonds were issued under the Conservatives. Reeves had nothing to do with that decision.

And she has nothing to do with the decision to sell them back to the markets now: the Bank of England is doing it in a policy called “quantitative tightening” (QT) — and it is doing so at a loss.

Because bond prices and interest rates move in opposite directions, the more the Bank sells – at a loss, the higher rates climb.

The private sector doesn’t want to absorb so many bonds, so it demands a sweetener: higher yields. The Bank’s policy has engineered exactly the squeeze Reeves now faces.

In colloquial terms: the bankers have stabbed her in the back.

This raises an obvious question: why doesn’t Reeves tell them to stop doing such a damned silly thing in such a damned silly way?

There are options.

She could demand that the Bank move to passive QT, letting bonds expire naturally instead of dumping them at knock-down prices.

She could tax the Quantitative Easing windfalls that banks have been pocketing — worth billions of pounds every year.

She could even revisit Labour’s “iron rules” on debt, which tie the government’s hands while the City dictates the terms.

Instead, the talk in Westminster is of spending cuts or tax rises — punishing ordinary people yet again while the real culprits sit comfortably in the Threadneedle Street boardroom.

The Guardian has only just woken up to this story, but here at Vox Political I warned back in March that QT would trap Reeves in exactly this bind.

I said it then and it is true now: the Bank of England is breaking Labour’s economy – using tools that the Tories gave it.

The question is whether Reeves  will stand up to them — or meekly pass the pain down to the rest of us.

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