The high cost of budget jitters: Borrowers face a tough hit as interest rates soar, says ALEX BRUMMER

Labour’s mission for the economy is to end Tory chaos. “Every commitment a Labor government makes will be based on sound money and economic stability,” he proclaimed in his election manifesto.

The formula was similar to that adopted by Bill Clinton after 12 years of Republican government in the United States.

He attempted to measure success by restoring stability to the public debt market.

Rachel Reeves aimed for a good start with her quick audit of the economy on July 30.

She sought to demonstrate her determination to get the public finances under control with the means-tested winter fuel subsidy for older Britons and some token cuts to road projects.

The Chancellor was determined not to rush ahead with an early budget and a “quick and dirty” assessment of public finances.

He opted for a more orderly approach, giving more time to the strengthened Office for Budget Responsibility (OBR).

The first version of his budget, which includes measures to strengthen public investment, should be delivered today, before the October 30 declaration.

The long-awaited stability has been ruined. The combination of a negative interpretation of the Tory heritage, turmoil in Number 10 and fears that the Government will change fiscal targets to accommodate greater public investment are destabilizing bond markets.

The 10-year bond yield has risen rapidly from 3.75 percent in mid-September to 4.22 percent.

The gap between UK yields and those in Germany (where government debt and borrowing is moderate) has widened to 1.94 per cent, which is the highest level in 14 months.

Liz Truss’ unfunded ‘mini-budget’ may be old history, but the lessons are not forgotten.

High bond rates mean worse deals for borrowers and better options for savers as challenger banks offer one-year cash ISAs paying 4.56 per cent.

The Bank of England could push bond yields lower if it cuts the bank rate from 5 percent on November 7. But the Monetary Policy Committee that sets interest rates is not known for its boldness.

smoking gun

Imperial Brands is a deeply unfashionable stock and excluded by many fund managers.

But since Stefan Bomhard unveiled a new strategy in January 2021, it has become a star player in the tobacco sector, returning more than £10bn to shareholders in dividends and buybacks.

That’s more than half the group’s £18bn market value.

In the latest update, Imps shares rose another 4.1 percent and the projected return stands at 6.92 percent.

Despite the health risks, the British group continues to profit from an addictive habit and is compensating for lower volumes by raising prices on key brands such as Winston cigarettes and Backwood cigars.

Tobacco remains the main breadwinner for the family and represents more than 90 percent of income.

But we are seeing the beginnings of a less toxic future.

Sales of what are known as next-generation products (NPGs), such as vaporizers, e-cigarettes and oral pouches (which work very well in the United States), soared 30 percent.

These are not exempt from health and safety issues. A less hostile future is possible, but by no means guaranteed.

Legal minefield

Over the decades, the Serious Fraud Office (SFO) has become famous for its high-profile failures. Fraud has been much more difficult to prosecute than corporate bribery, where the legislation is clearer.

No case has been more destructive than his entanglement with the Kazakhstan-based Eurasian Natural Resources Corporation (ENRC).

Regardless of any alleged wrongdoing by ENRC, the SFO’s handling of a corruption investigation, which began in 2023 and ended last year due to “insufficient admissible evidence”, has been humiliating.

In the latest episode, the SFO reached a settlement with ENRC after it accused the agency of leaking confidential information about its investigation to the media.

The SFO could still be liable for large damages because errors in its botched investigation have cost the mining company dearly. The agency has set aside £237.7bn to cover potential legal costs.

Nick Ephgrave, the former Met deputy commissioner who took charge of the SFO last year, needs some urgent wins. Of all the shams that have tarnished the SFO’s reputation, none has been greater than the ENRC.