Government borrowing costs jump on reports of Reeves dropping income tax rise

UK government borrowing costs have risen in reaction to reports the chancellor will not increase income tax in the upcoming Budget.

The interest rate on 10-year government bonds, known as the yield, jumped to 5.56% from 5.44%, indicating the cost to government if it chose to borrow over this length of time.

Yields on 20- and 30-year gilts also rose by a similar amount in early trading.

Governments borrow money from investors by selling bonds – known as gilts – which is a loan the government promises to pay back at the end of an agreed time.