UK government borrowing costs spike amid tensions in ruling Labour party

• U.K. government borrowing costs spiked on Wednesday, after a contentious welfare bill revealed fractures in the Labour government.
• The yield on the benchmark 10-year gilt rose by 22 basis points in early afternoon trade.
• Prime Minister Keir Starmer did not answer a question about the future of Finance Minister Rachel Reeves's position in his government during an exchange in Parliament on Wednesday.

U.K. government borrowing costs spiked on Wednesday, amid mounting signs of division within the governing Labour party.

The yield on benchmark 10-year government bonds, known as gilts, was 22 basis points higher at 1:33 p.m. in London.

Tensions in the Labour Party leadership came to a head following a government U-turn over a controversial welfare reforms bill. The debate resulted in concessions to rebel lawmakers who opposed cuts to disability benefits that effectively wiped out the £5 billion of savings initially envisaged by the reforms — raising the prospect of further tax rises in the fall.

After the passage of the bill, British Prime Minister Keir Starmer was asked in Parliament whether his finance minister, Rachel Reeves, would hold her position for the remainder of his current term. Starmer deflected the question, instead pointing the finger at the leader of the opposition, Kemi Badenoch.

In a statement after the exchange in Parliament, the prime minister's press secretary said Reeves “is going nowhere.”

“She has the Prime Minister's full backing,” the press secretary said. “He has said it plenty of times, he doesn't need to repeat it every time the Leader of the Opposition speculates about Labour politicians.”

Reeves has come under sustained pressure since the Treasury's “Autumn Budget” last fall when she announced strict rules that limited the government's ability to spend or borrow.