Sir Keir Starmer is in a large and growing hole. Long-term borrowing costs are at their highest in almost 30 years and that is a big problem for a prime minister who is spending a lot more money than he has.

It is just three years since a previous occupant of No 10 was evicted by chaos in the bond markets. Liz Truss has been quick to point to the current turmoil and ask why the current prime minister isn’t getting the same treatment.

The interest rate on the Government’s 30-year debt – at almost 5.7pc – is “much higher than in 2022”, she wrote on X.

“Where is the hysteria?” she asked.

Economists and market analysts agree the current situation is dire – but there are critical differences that mean Sir Keir is not about to be forced to call in the removals van.

First, the scale and pace of the crunch.

Borrowing costs for the Government have risen notably. It currently pays almost 5.7pc to lend to the UK state for 30 years, up from just under 4.7pc at the time of the general election. That is an increase of a percentage point in just over a year.

By contrast, under Truss, borrowing costs leapt from 3.4pc when she took the premiership in early September 2022 to almost 5pc later that month.

Worse still, yields had already risen sharply that summer. In early August, the government only had to pay 2.29pc to borrow for 30 years, so the rate more than doubled in under two months.

The speed at which borrowing costs rose then made the crisis more acute. There was a sense that, without action, costs would continue to spiral.

Borrowing costs may be higher today but they have been rising slowly and steadily, lessening the pressure.

Second, the international comparisons.

It is true that Britain pays more than similar advanced economies to borrow right now. Some blame stubborn inflation in the UK, which means investors want more compensation for lending money – but costs are rising at a similar scale everywhere.

That was not the case when Truss was forced out. In 2022, British borrowing costs were far out of line with nations like France, and overtook those in the US, which had previously paid more than the UK for its debt.

“Three years ago it was a UK-specific problem. Liz Truss proposed a huge expansion of the budget deficit, sidelined the OBR, appeared to be sidelining the Bank of England and didn’t seem to want to tie her policy to forecasts of the deficit or the debt stock,” says Rob Wood, at Pantheon Macroeconomics.

“Now it is a global move. Government debt everywhere is high. Markets are concerned about the ability of governments to take the necessary action to repay that debt. Indeed, governments across the world are taking the opposite action.”

That is hardly reassuring – but since borrowing costs are rising by a similar margin everywhere, there is less of a sense of panic in markets about the UK.

Third, the pound.

Under Truss, sterling slumped below $1.07 against the dollar following a precipitous fall that took it to the lowest level since the 1980s.

This time around, the pound has lost a few cents but is still up at more than $1.33, above the $1.27 level at the time of last year’s election.

This is not indicative of a widespread loss of confidence in all things British.

“There is no stampede out of UK assets,” says Rob Morgan, the chief investment analyst at Charles Stanley. “Therefore, the situation is manageable in the short term, albeit fiscal confidence is hard won and can be quickly lost.”

That is a critical warning: the Government is still in a tough spot and higher borrowing costs make its predicament worse.

Alex Kerr, at Capital Economics, estimates that the rise in long-term borrowing costs since the Budget has added another £5.8bn to Rachel Reeves’s annual debt interest spending.

Crucially, while the bond market may not be exerting lethal pressure on Sir Keir for now, that is not to say it won’t in the future.

Russel Matthews, an investment manager at RBC BlueBay, says: “If the Government fails to convince the market of its fiscal plans around the time of the autumn Budget then things could start to get messy and we could have a rerun of what happened during Truss’s tenure as PM.”

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