Labour can’t be trusted to run a modern Western economy.
At least Keir Starmer and Rachel Reeves understand the bond market. Few others do (Image: Getty)
The party has no idea how the financial system works. When markets don’t do what they want, they lash out like a sulky child smashing up a toy.
The left has always been hostile to free markets. They see them as the final barrier blocking their dream of building a socialist utopia. In truth, markets are more like a reality check. They set limits, showing governments what they can and cannot do.
The bond market is the most crucial of all. This is where governments raise the cash to fund their spending.
It’s dominated by heavyweight investors such as pension funds, who buy government bonds to match their liabilities.
Labour loathes it, because it’s the one thing stopping Rachel Reeves from borrowing and splurging billions.
We should thank the bond market for holding the line. But Labour loathes it. With Keir Starmer and Rachel Reeves flailing, the party is losing its collective mind.
Andy Burnham, Mayor of Manchester, reckons that’s his chance. Yesterday, he used an interview with the New Statesman to launch his leadership pitch, branding the PM “divisive”.
Burnham believes he’d make a better PM, and plenty of Labour MPs agree.
Yet in a single sentence, Burnham has exposed his economic illiteracy. Or rather, fiscal insanity.
Burnham’s interview was a pitch to restless Labour MPs and activists. He knows his audience and reckons they’ll swallow anything. Unless he actually believes what he’s saying. Which is terrifying.
Plenty on the left now rail against bond investors. Burnham echoed their frustration, declaring: “We’ve got to get beyond this thing of being in hock to the bond markets.”
He wants to borrow an extra £40billion to build council housing. That’s a crowd-pleaser in Labour circles, but there’s a problem.
The UK will borrow at least £150billion this year. On current trends, that could hit £200billion. At the same time, the UK must refinance another £150billion of existing debt that’s coming due.
Adding Burnham’s £40billion on top would push the system to breaking point and beyond. It’s a crazy proposal.
The bond market doesn’t trust us. It already charges us more interest than any other Western country. This is called the “moron premium”, because bond investors think our politicians are morons. Just wait till they see Andy Burnham.
There’s a good reason why we’re “in hock” to the bond markets. Because we’re relying on them to keep the lights on.
The UK stopped living within its means years ago. We borrow too much, spend too much, tax too much and grow too slowly. None of that is the fault of the bond market.
Burnham is doing what every feckless debtor does when the bills mount up, and blaming the creditors.
He’s selling MPs and activists the comforting fiction that Britain could borrow and spend whatever it wants if only the bond market wasn’t so mean.
In reality, it’s the bond market that keeps us on life support.
Far from freeing us, Burnham’s plan would make Britain more dependent on global investors than ever.
In one sentence, he’s shown how Labour is lost in a fantasy world. The market is the last guardrail keeping us within our means. As it did with Liz Truss.
The last thing Keir Starmer and Rachel Reeves should do is stick two fingers up at the bond market. Then we’ll discover what it’s really like to be in hock to bond investors. It won’t be pretty.
