Britain’s borrowing costs hit their highest level since 2007 after Middle East tensions pushed oil prices above $108.

Yields on 10-year gilts, which determine the price the treasury pays to borrow money, rose above 5.43pc on Monday, before edging back to 5.42pc.

These are levels not seen in almost two decades, underlining the challenge facing John Healey as he prepares for next month’s Budget.

The Chancellor is coming under pressure to slash spending or raise taxes to bring Britain’s borrowing costs under control, against a backdrop of growing debt and rising inflation.

The surge in 10-year gilt yields pushes them above the 19-year high of 5.41pc recorded earlier this month, threatening to put a dent in Mr Healey’s fiscal headroom – a self-imposed guardrail to guide public spending.

Economists said high costs reflect the scale of Britain’s near-£3tn national debt and the rise in inflation facing the country.

“The uncomfortable truth for the PM and his Chancellor, John Healey ...…