Pound Sterling underperforms as UK welfare bill prompts fiscal risks
The Pound Sterling (GBP) trades lower against its major peers on Tuesday. The British currency remains on the back foot due to the overhang of mounting fiscal risks in the United Kingdom (UK) following the presentation of a higher welfare spending bill by the Labour government before the House of Commons last week.
The welfare bill announced showed an increase in the standard allowance for Universal Credit (UC), which is expected to raise the debt financial burden by £4.8 billion by fiscal year 2029-2030.. This led to investors dumping UK gilts as the bill raised financial risks.
Meanwhile, Chancellor of the Exchequer Rachel Reeves has confirmed that the government would fund the additional financial burden, but didn’t clarify whether it will be through tax increases or spending cuts. "Of course, there is a cost to the welfare changes that Parliament voted through this week and that will be reflected in the Budget," Reeves said.
Source: Fxstreet
