Political uncertainly and borrow/spending out of control. The UK is heading towards an economic meltdown:
Britain’s long-term government borrowing costs jumped to their highest level for 28 years as City traders braced for a potential Labour leadership challenge from Andy Burnham.
The pound is also on track for its worst week since 2024 amid growing concern over political instability.
Andy Burnham is being tipped as a possible PM. He is a left wing politician who said in 2025 “who elected the bond market?”.
The only way to lower long-term interest rates is to increase buying of them. If the “unelected bond market” won’t buy them that implies that elected officials will, right?
That’s quantitative easing (QE). Every government that ever tried it eventually ran onto the inflationary rocks as their currency value was destroyed.
“Over the hill” from past imperial glories empires have lotsa expensive treasured irrationalities that cripple their economies, from glorious treasure trove buildings and antiquated militaries through barnacle encrusted laws and legal structures to permanently leaching privileged aristos and labor structures. Coming to a theater near you soon!
Or taxes are not high enough. Not what you wanted to hear in the first place. In fact all of this stuff is propaganda to avoid raising taxes.
The UK operates a tiered Corporation Tax system, with a main rate of 25% for profits exceeding £250,000 and a small profits rate of 19% for profits up to £50,000.
Bond markets definitely have more influence than most politicians want to admit - they can essentially veto government spending plans by demanding higher yields. The QE route has obvious inflationary risks but governments often feel they have no choice when borrowing costs spike this dramatically. UK gilt markets have been particularly volatile since the Truss budget fiasco showed how quickly things can unravel. Political uncertainty just makes traders more nervous and drives rates higher.
The problem at the moment is The Labour Party which is under the grip of some very left wing politicians. The IMF has recently said that Britain is at peak tax (see the Laffer Curve). Welfare now pays out more than we take in in income tax. Parliament will not vote for cuts in welfare and many on the Left will just say ‘tax the rich’. Problem is that the rich are not hanging around to be fleeced:
As many as one in six of the individuals and families who appeared in the closely-followed ranking in 2024 did not feature in this year’s iteration, its compiler Robert Watts said, because a host of the mainstays of previous lists had quit the UK for a lower-tax jurisdictions.
I’ve just come across this from a Labour MP
Bond markets will have to fall in line with an Andy Burnham premiership even if the Manchester mayor pursues a considerably more left-leaning economic platform, a Labour MP has claimed.
Burnham will probably make her Chancellor of the Exchequer if he gets in
