Britain’s long-term borrowing costs are nearing their highest level since 1998 amid fears that Rachel Reeves is failing to balance the public finances.

The yield on 30-year UK gilts – a benchmark for the cost of servicing the national debt – jumped as much as nine basis points to 5.63pc on Tuesday, close to a 27-year high.

This reflected the biggest daily increase of any major global economy, as economists warned that Britain was paying a “moron premium” on its debt.

Rising borrowing costs will increase pressure on the Chancellor as she prepares for her autumn Budget, with some predicting she will have to raise taxes significantly to plug a hole of up to £50bn in the nation’s finances.

Mel Stride, the shadow chancellor, said: “This is what happens when you spend and borrow like there’s no tomorrow.”

As well as the impact of a growing debt interest bill, the public finances have come under mounting pressure after Sir Keir Starmer was forced to water down welfare cuts in the face of a backbench rebellion.

There is also a risk that the Office for Budget Responsibility (OBR) will downgrade its growth forecast for the UK, in a move that would further limit Ms Reeves’s room for manoeuvre.

Mohit Kumar, an economist at Jefferies, said there was “a negative view on the UK fiscal picture”.

“The Chancellor is facing a significant shortfall on the fiscal side,” he said. “Our view is that growth is going to be weaker than forecast, which further deteriorates the fiscal picture.

“We are reaching a stage where further tax rises will be counterproductive and measures to cut spending haven’t had much success so far.”

Ms Reeves has recently rearranged her top team in preparation for her Budget, giving pensions minister Torsten Bell responsibility for economic policy, according to The New Statesman.

Simon French, chief UK economist at Panmure Liberum, said one of Mr Bell’s first jobs would be to address why there was a “UK ‘moron premium’ on gilt yields”.

Britain’s debt costs have been the highest among G7 economies since the Chancellor’s Spring Statement in March.

At the time, she was forced to restore £9.9bn of fiscal headroom to meet her borrowing targets.

She faces an even bigger task to do the same thing in autumn.

Alex Kerr, at Capital Economics, predicted that Ms Reeves will have to raise between £17bn and £27bn, “most of which will probably be funded by tax rises”.

Mr French said the UK’s higher borrowing costs are “a warning for the Government, which it would do well to heed”.

“The warnings from the bond market are getting more significant and therefore more attention should be paid to avoiding bad outcomes,” he said.

“Markets want politicians to be pragmatists, not ideologues. And the facts have fundamentally changed in terms of debt sustainability. I think the Chancellor gets it. The problem is that the rest of her party doesn’t.”

He added: “Bond market pricing suggests UK fiscal policy is drifting without an anchor.”

The surge in Britain’s borrowing costs comes amid growing risks across global debt markets.

Donald Trump sent US borrowing costs higher on Tuesday after he claimed to have sacked one of the governors of the Federal Reserve over allegations of fraud.

Lisa Cook later said she would not resign and insisted the president did not have the power to sack her.

However, the move still posed a “genuine threat” to markets, according to Thomas Mathews, at Capital Economics.

He said: “With these moves happening in the context of broader attacks on the credibility of US institutions, investor confidence in the Fed’s independence shouldn’t be taken for granted.”

Meanwhile, French long-term borrowing costs hit their highest level since 2011 after prime minister François Bayrou called for a no-confidence vote on plans to pass unpopular budget cuts.

Saxo Bank, an analyst John Hardy, asked: “Can the bond vigilantes corral the French politicians into moving forward with austerity or are they willing to test the ‘Truss-nomics’ risks to French debt should they allow the government to fail?”

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