hello, i'm annita mcveigh. you're watching the context on bbc news. still to come this hour, the music industry enjoys a bumper year, with more money spent on recorded music in the uk in 2024 than ever before. here, economists are warning that the chancellor rachel reeves could be forced into further tax hikes or cuts to spending plans, after a jump in government borrowing costs. government borrowing costs hit their highest level this century amid a continued sell—off in the bond market and investor worries about the threat of so—called "stagflation", where the economy doesn't grow but inflation remains high.

inflation is the rate at which prices increase. the yield on the benchmark 10—year gilt, which reflects the cost of government borrowing, today climbed to a peak of 4.81%, the highest since the 2008 financial crisis. the cost of longer—term borrowing also rose further, with the yield on the 30—year gilt peaking at 5.36%, the highest level since 1998. joining me to make sense of it all is kathleen brooks, research director at the online broker xtb. kathleen, thank you very much forjoining us. a lot of people might be listening to that and thinking, what are bonds, what are guilds, what does this all mean, the cost of borrowing has risen to its highest lung from 27 years? explain that if you could in the simplest terms? the cost of borrowing has not for everybody risen to the highest level this century, but it has the government. soak bonds with the governments issue when they want to raise money because we spend more than we bring in, so we need to finance a deficit, so we are

reliant on investors overseas and domestically to buy our government debt, so that is a piece of paper or a note, really, or used to be, that said the government will pay you back, so it is io you. yields are what an investor earns on that and they tend to rise when investors are little bit worried about the outlook and the outlook is not so clear—cut and that is what is happening, and actually in the last, most of the century, we have seen not very much exciting around the review came we pay its debt, and we are not at the level of anxiety now, but it is the pay of the increase in yields —— anxiety around the uk paying its debts. what is a need for the government's emissions to get the economy growing, then, and indeed for the costs of the goods and services we buy —— what does it mean for the government's ambitions? without a doubt insular _ government's ambitions? without

a doubt insular rachel— government's ambitions? without a doubt insular rachel reeves - a doubt insular rachel reeves is in some tricky physical waters at the moment. she we had made it plain she was on to wipe the slate clean, put us on a really secure physical foundation. that looks like it is in tatters with this rise in borrowing costs. however, the issue around it really is to do with, yes, we've got more bond to sales going on, yes, we also have an economy that is slowing down, at the same time as inflation remains strong. that is called stagflation. when growth for maine's week but even higher inflation. this is notjust a uk problem, you're seeing it elsewhere as well, but because we had that focus in 2022 with the liz truss budget, i think all eyes have been on the uk for a while, and i think investors are not entirely convinced that we are on a secure physical —— fiscal footing and that his wife uk bonds underperform global peers. but make no mistake, this is a global trend... i

mistake, this is a global trend- - -_ mistake, this is a global trend... ., ., ., trend... i was going to ask you whether we — trend... i was going to ask you whether we are _ trend... i was going to ask you whether we are seeing - trend... i was going to ask you whether we are seeing the - trend... i was going to ask you l whether we are seeing the cause of borrowing rising for other governments around the world as well? ., governments around the world as well? . ., ,, ., , well? yeah, we are. the us has had the highest _ well? yeah, we are. the us has had the highest increase - well? yeah, we are. the us has had the highest increase in - well? yeah, we are. the us has had the highest increase in the l had the highest increase in the cause of borrowing over the last three months, the uk is very much in lockstep with that, though, and the uk has been the worst performer this week. that is uk bonds, the yields have risen by the most this week. but if you look over the last three months, the uk has massively underperformed all of europe, so it does suggest there are domestic factors, but there is this global trend towards higher yields and it is just the perfect storm for the chancellor at the moment and definitely not what they want, because the cost is 100 billion a year to serve as our public sector debt, and that is huge. it is also wiped out any fiscal headroom the chancellor was hoping to have from the budget backin hoping to have from the budget back in october, so it really looks like we are in, she is in, anyway, some tricky physical waters. kathleen

brooks from _ physical waters. kathleen brooks from online - physical waters. kathleen | brooks from online broker physical waters. kathleen - brooks from online broker xtb, think you very much. let's bring in the panel once again. nathalie tocci and chris bruce. chris, as we heard there from my last guest, the us having the highest in the us government having the highest cost of borrowing of any government over the last three months. what do you think donald trump is going to do about that, tariffs, getting rid of inflation, he has talked about? lofty ambitions, certainly the latter? absolutely. so we'll note tariffs _ absolutely. so we'll note tariffs are a horrible idea when _ tariffs are a horrible idea when it _ tariffs are a horrible idea when it comes to dealing with this type _ when it comes to dealing with this type of issue. but he is going — this type of issue. but he is going to _ this type of issue. but he is going to have his opinions on how— going to have his opinions on how to — going to have his opinions on how to do _ going to have his opinions on how to do this. when it comes down — how to do this. when it comes down to— how to do this. when it comes down to it. _ how to do this. when it comes down to it, we know that inflation _ down to it, we know that inflation was one of the reasons— inflation was one of the reasons why vice president kamaia _ reasons why vice president kamala harris lost the election, so americans are looking _ election, so americans are looking for a solution, looking for a _ looking for a solution, looking for a solution as soon as possible _ for a solution as soon as possible. i've yet to see a

solidified plan from president—elect donald trump, so everyone is looking forward to that, — so everyone is looking forward to that, but i think the market is already— to that, but i think the market is already showing where is. government bonds being sold off of a people are not trusting the market as much, and on january— the market as much, and on january 20, when he gets sworn in, january 20, when he gets sworn in. we _ january 20, when he gets sworn in. we wiii— january 20, when he gets sworn in, we will see the reaction from — in, we will see the reaction from the _ in, we will see the reaction from the markets. when it comes down _ from the markets. when it comes down to— from the markets. when it comes down to it — from the markets. when it comes down to it america still has a very— down to it america still has a very healthy at a very strong economy _ very healthy at a very strong economy. inflation is notjust impacting america, it is impacting america, it is impacting the entire world, so this is— impacting the entire world, so this is a — impacting the entire world, so this is a global issue, does not — this is a global issue, does notiust_ this is a global issue, does notjust an american this is a global issue, does not just an american issue. share, _ not just an american issue. share, and nathalie, a global issue, but given that we don't quite know how tariffs, talked about by donald trump of our going have an impact on other parts of the world, including hearing euro, you think you could see a move from the uk to try to get closer to the eu again when it comes to matters of the economy? i

again when it comes to matters of the economy?— of the economy? i mean, it's very clear — of the economy? i mean, it's very clear that _ of the economy? i mean, it's very clear that in _ of the economy? i mean, it's very clear that in a _ of the economy? i mean, it's very clear that in a situation l very clear that in a situation in which the united states is threatening a trade war, size matters, right? and therefore it is very complicated for the eu standing how does the uk, standing alone to essentially face a trade war with the united states, especially in this context, the labour government, as we know, inherited a weak economy, as we been hearing it has been struggling to essentially revamp it, and now they are facing on the one hand the risk of a trade war, the way in which this is actually elected further increase inflation pressures, and the way in which also, given to security problems in europe and given the threat of a us disengagement from european security, defence spending is going to go up, and therefore the space to spend on the kind of social issues that the

labour government did plan to spend on obviously diminishes up spend on obviously diminishes up and this creates all sorts of other political problems because of course this is happening as we have been discussing in a context in which the far right continues to make headway and this is not just in europe, it is also a uk story, and so the way in which all of this will interlock in 2025 is extremely worrying. chris, briefly to you, if you would, it takes us back to one of the cautions we discussed when talking about greenland. do you think this is a case of donald trump trying to throw some political weight around ahead of returning to office? it is, but i wholeheartedly do believe — it is, but i wholeheartedly do believe that donald trump is going — believe that donald trump is going to _ believe that donald trump is going to put in place tariffs. we've — going to put in place tariffs. we've seen other countries already— we've seen other countries already talking to you the united _ already talking to you the united states, dealing with tariffs _ united states, dealing with tariffs. we sell it happen in canada _ tariffs. we sell it happen in canada with their prime minister, so when it comes down to it, _ minister, so when it comes down to it. i_ minister, so when it comes down to it. i do — minister, so when it comes down to it, i do take him at his word _ to it, i do take him at his word about tariffs, but i also taken — word about tariffs, but i also taken at _ word about tariffs, but i also taken at his word that this is not to—

taken at his word that this is not to solve inflation, the american people will have to talk about what is going to be the best— talk about what is going to be the best course of action going forward — the best course of action going forward. , ., ., forward. 0k, chris, nathalie, we are moving _ forward. 0k, chris, nathalie, we are moving on _ forward. 0k, chris, nathalie, we are moving on to - forward. ok, chris, nathalie, we are moving on to our- forward. 0k, chris, nathalie, we are moving on to our next topic now. today is certainly not the day the music died. in fact, new figures show uk music sales hit a 20—year high of 2.4 billion in 2024, helped by — among other things — taylor swift's latest album. figures from the digital and entertainment retail association show sales were driven by a combination of streaming and the revival of vinyls. here's the association's ceo, kim bayley. the market grew by nearly 8% last year. that was on the back of growth last year and the year before, and so for 12 years now, we've consistently been seeing the music market improve, really, thanks to those streaming services which came into the market and monetised something that previously was illegal file sharing. so, from my perspective, we're definitely in rude health, and 70% of that revenue is flowing back to the artists.

back now to nathalie and chris, and i wonder in the last year or so, and i wonder in the last year orso, have and i wonder in the last year or so, have you been consuming more music, buying more music? i actually have, and certainly my son has quite a bit, so i can see where that trend is coming from, and i think what is interesting about this is that for a long while, the music industry had really suffered in the digital age, and it is fascinating to see the way in which there is now writing on that wave and reviving itself through it. from a personal perspective, in yourfamily, what from a personal perspective, in your family, what has driven that move towards buying more music was yellow it is interesting. i'm not quite sure, i think there's all misty cultural shift going on, right? there was a phase in which they will attitude was really revolving around, how can i get this

music, essentially, not paying for it? and gradually, and i'm not quite sure of it goes back to the conversation about education we were having, the idea that this is actually something that is important to pay for has been gradually taking hold.— pay for has been gradually taking hold. chris, what you make of that _ taking hold. chris, what you make of that point - taking hold. chris, what you make of that point that - make of that point that nathalie has 1534 00:11:21,189 -