> The U.K.’s fragile fiscal situation is back in focus as yields on long-term government bonds surged, topping their U.S. counterparts for the first time this century.
But the chart appears to show the black line above the red line quite a few times since 2000? Am I reading it wrong?
Clearly the solution is to give the ultra-rich a large tax break. That always seems to be the solution. If and when tax for the ultra-rich gets to zero, new proposals will then be for full-on government subsidies to the ultra-rich.
(Edit - apparently what I can tell is not quite accurate, but it’s possible the UK is paying 8-15% of the government budget in interest each year, which is still quite a chunk)
From what I can tell from listening to a lot of UK news still, the country finds itself economically stagnating while suffering from a level of debt that makes debt repayment the second largest chunk of government expenditure after the NHS.
There’s so little room for manoeuvre that successive governments are left tweaking the edges of the budget but unable to carry out any major plans or reforms.
And on the subject of Reform… they think they’re going to axe fat from the administrative budget at every level by emulating Elon Musk, when it’s not clear there is a lot of fat. There’s only so many diversity officers to fire.
Hard to see what the future is there at the moment.
Sometimes you can tell which politicians are serious about bringing order to budgets by seeing which ones are talking about what hard cuts they would make. Are they talking about cuts to entitlements and military? Or are they talking about cutting the park service and "diversity hires"?
It's like the family drowning in debt who decides to cut mom and dad's weekly trip for Starbuck's Latte at the Farmer's Market. Yet won't look at the two car payments, the USD500000 mortgage, or the private school tuition for the kids. Maybe in their hearts they believe it truly is the way out? But a good financial advisor would probably tell them not to worry about the fly on their toe when there are 4 or 5 elephants stacked on their chests.
And it can be hard to receive those kinds of messages. As hard for individual families as it is for nations.
Not to mention the ongoing spending programs of continuing the past tax cuts of Sunak, Johnson, May, Cameron, Brown, Blair, Major and Thatcher. Tax cuts are spending programs.
> that makes debt repayment the second largest chunk of government expenditure after the NHS.
Are you sure about this? If you scroll down to the pie chart on the following page, health is not the largest chunk of expenditure (that’s social security) and interest on debt is fifth.
There is both a lot of fat and also cutting it won't solve the problem. The fat is worth cutting for political reasons alone.
It's still years away from the next election so it's hard to know what economic angle Reform will run on. But it will probably have to be one similar to the 2010 coalition, where the need for spending cuts was explicitly advertised and voted for.
You should look at the total effect of debt if your intention is to study what would happen without debt. So the total effect is:
1) 150 billion per year net new borrowing
2) 115 billion per year interest payments
Conclusion: the effect on the budget of stopping this whole debt thing would be a net cost of either 150 or 265 billion per year (because you "lose" the new debt, but you still have to pay the interest payments), or about triple the current budget cost of debt, or 12% to 21% of the total government budget.
The cost of making the debt fall as fast as it was rising would be 150b + 150b + 115b = 415 billion per year, call it 33% of the government budget.
In contrast, making the problem worse at the current rate has a 3% positive effect on the budget. This will not change in the near future. It's exponential and it itself rises at about 8% per year, in other words, next year it'll be 3.2% (and the government could choose to force the banks' hands to get that down)
In other words: the government will do the opposite of what everyone's suggesting here, regardless of labour vs conservatives. Either party will increase lending and make the problem worse, faster. Why? Simple: they sure as hell aren't about to give up a quarter of the budget, especially when worsening the problem actually still has a positive effect on the budget (and a strong negative effect on the problem). Note that the interest payments are actually the smaller part of this. Not borrowing fresh money is between 60% and 70% of the "cost".
Which also shows that the problem is not the rich. Well, unless you count the government. And yes, I count organizations that spend 10% more than they "can" as rich. If spending more than your fair share isn't being rich, I don't know what is.
Furthermore the "reduce debt" is a trap argument. It ignores forget ... we die. Most of UK government expenditure is labor. In other words, reducing the debt, even just stopping the rise in debt, is effectively asking us to work harder now, in trade for the country being in a (let's be honest - slightly) better position in 10 years. So you're expected to give a lot up now, in trade for giving the rich more money now (and less in the future). But you'll die, and if you're 40 or above, the calculus will show that you'll get more government services before you die at 72 if we let the situation become worse, rather than fix it.
The fact that dozens of parasites can profit from advertising fraudulent store-of-value instruments is an indicator that there is a decent size of real store-of-value instruments and that they are unable to meet demand.
Such an HN-tier comment. The UK's excessive borrowing has nothing to do with the EU, which also has its own borrowing problems. It's because it has a Labour government whose backbenchers refuse to countenance any cuts or optimizations to welfare whatsoever, even though the current welfare levels are unaffordable and crippling the economy.
Leaving the EU has actually helped that, because the membership payments can now be spent on general costs, and it didn't worsen trade or the economy in any noticeable way.
The trouble with rejoining is that the rest of the EU won’t want to let them back in with all of the same privileges and opt-outs they were once afforded. I suspect the single greatest hurdle would be having to adopt the Euro.
While many in the EU may be sympathetic and forgiving, I sense countries like Germany and France want to ensure the UK rejoins as a far more integrated and dedicated member state than they were before. It doesn’t seem like the UK has much bargaining power in any potential application to rejoin.
The bull case for the UK is that they have an educated, English-speaking workforce and a stable legal system for protecting property rights. As they become poorer and poorer, you will be able to hire their talent cheaply as their standard of living further erodes.
Otherwise, I really don't see a lot of growth possibilities on the horizon. It is crab-mentality of taxing their richest citizens and companies ever more, but the juice is running out of that orange. So fundamental reform will eventually occur, over the shrieks and howls of the left. Reform UK is highly likely to win the next election. This isn't to say they will actually solve anything, but the pivot to the extreme right after a huge win for the left is a symptom of larger societal problems and widespread hand-wringing.
The Left didn't really "win big" in 2024; Starmer's Labour got fewer votes than Corbyn's 2017 bid. Labour swept parliament purely due to the Right splitting between Tory and Reform, and the spoiler effect of FPTP.
The right didn't split. Reform hardly existed at that point because the Tories called a snap election with nearly no notice specifically to stop Farage organizing in time.
What happened is simply that conservative voters stayed home. Massive vote abstention.
The UK has a lot of problems, but taxing the rich too much isn’t one of them. This is a shallow analysis.
If I had to pick one obvious economic problem with the UK it would be the vast economic disparity between London and most of the rest of the country and the unwillingness of successive governments to invest any significant amount of money in tackling it.
There is no cheap solution. Cutting taxes on the rich won’t magically grow the economy. That requires actual investment. However, as Liz Truss showed while trying to do something different, it’s very hard for the government to invest when any increase in borrowing leads to panic and a crash in the markets.
The Truss event was due to crap regulation and bad moves by the BoE. The UK bond yield is now higher than it was during the Truss spike which according to Labour "crashed the economy". Actual cause of the problem was a 2008-style blowup in pension related securities.
The bull case, given the US betrayal* of the notion of an order that includes Europe, is that the UK establishment will figure out their way to leverage their middle position between Europe and the US to act as a middleman for the U.S. looting the vast quantity of unsecured wealth in Europe and find a way to do this profitably enough to account for their uncompetitive resource import costs without giving cause for the U.S. to cut out the middleman. Like Hong Kong was for China in the 20th century, but with more extraction. Taxes are a red herring.
The workforce and legible but only occasionally officially perverted legal system are valuable, sure, but it's the 2020s. Plenty of places can offer that. As for the pivot to the right, it's a net gain for all UK citizens who don't outwardly present as a minority or can hide it, since they can suck up to one of the few big petroleum and food exporters at a discount.
.
* footnote: It should go without saying, but Trumpism is just an expression of pre-existing vast sociocultural forces.
Labour is no longer a leftist party, it is better described a corporatist party. When capitalism is in decay like it is now, a corporatist (liberal, right, whatever) party won't push back against exploitative companies. The people notice the ineffectiveness of the incumbents and vote for whatever the 2nd most popular party is. We'll see if "Your Party" can break the cycle
Agreed. I lean left on the UK spectrum and it was the first time I voted other than Labour in a GE. The walk-back on stuff like tuition fees and childcare was untenable, as was ordering MPs to stay away from picket lines. The nightmare continued with winter fuel payments, welfare "reforms" and a lack of leadership over small boats (which are not a pressing matter despite the frenzy being whipped up by Reform).
> Reform UK is highly likely to win the next election.
No it is not highly likely at all.
People who say this simply do not understand the depth of the structural challenge involved in getting from four MPs to 326 (or 325 or so if you delete the odd non-active MP).
Even if they get close but no cigar and secure a coalition it would be with the Conservatives, whose failures will not be forgotten soon.
I think it is wholly possible, alas, that Reform will see a hundred or so MPs and be the official opposition. But it should not be overstated that the Liberal Democrats will sooner offer to be in a coalition with Labour, and the country tolerate that again from them, than allow Reform the chance to undo Labour's work.
And that is before you consider that, ahem, the shine is off Reform's chums in the USA already and that situation is not going to get better soon. Reform would need a massive amount of money -- Musk money and sketchy crypto money, basically -- to get anywhere, and Trump's orange thumb on the scale with US social media firms. And we don't like that stuff. I cannot stress enough how badly that kind of intervention would go for them.
There are not many people in the UK who would say that Starmer's win was a "huge win for the left". Especially Labour voters. The "left" doesn't have much to do with it. Centrism, sanity, and the hope for an end to grift and stupidity and cruelty do. The failings of the right -- of idiots like Liz Truss and Brexit -- have more.
Reform fielded a candidate in essentially every constituency in 2024 and got five elected. One of them is sitting as an independent already because he's under investigation for corruption.
Yes, Reform got a huge swing in the local (council) elections, and some people think that is predictive. But historically it's nowhere near as predictive as Reform voters would like.
You might be behind the times. Current polls show Reform gaining a huge majority and the Conservatives dropping to a few dozen seats if an election were held tomorrow. Labour would also be slaughtered.
Readit News
But the chart appears to show the black line above the red line quite a few times since 2000? Am I reading it wrong?
No. You're exposing poor reportage and sloppy editing. CoinDesk isn't exactly Bloomberg.
From what I can tell from listening to a lot of UK news still, the country finds itself economically stagnating while suffering from a level of debt that makes debt repayment the second largest chunk of government expenditure after the NHS.
There’s so little room for manoeuvre that successive governments are left tweaking the edges of the budget but unable to carry out any major plans or reforms.
And on the subject of Reform… they think they’re going to axe fat from the administrative budget at every level by emulating Elon Musk, when it’s not clear there is a lot of fat. There’s only so many diversity officers to fire.
Hard to see what the future is there at the moment.
It's like the family drowning in debt who decides to cut mom and dad's weekly trip for Starbuck's Latte at the Farmer's Market. Yet won't look at the two car payments, the USD500000 mortgage, or the private school tuition for the kids. Maybe in their hearts they believe it truly is the way out? But a good financial advisor would probably tell them not to worry about the fly on their toe when there are 4 or 5 elephants stacked on their chests.
And it can be hard to receive those kinds of messages. As hard for individual families as it is for nations.
Are you sure about this? If you scroll down to the pie chart on the following page, health is not the largest chunk of expenditure (that’s social security) and interest on debt is fifth.
https://ifs.org.uk/taxlab/taxlab-key-questions/what-does-gov...
But I can also find articles that seem to say the government spent 16.4 billion just in June - https://www.bbc.com/news/articles/c4g2rky498wo
Either way, listening the Today program a few times a week from overseas has possibly warped my view!
Perhaps the constraint is more to do with currency fluctuations and gilt yield rises when it looks like they’re wanting to borrow more.
(Edit - the OBR! Not “The Orb”, though frankly if the orb would like to hold forth on the economy I’d probably listen to them over most commentators…)
It's still years away from the next election so it's hard to know what economic angle Reform will run on. But it will probably have to be one similar to the 2010 coalition, where the need for spending cuts was explicitly advertised and voted for.
1) 150 billion per year net new borrowing
2) 115 billion per year interest payments
Conclusion: the effect on the budget of stopping this whole debt thing would be a net cost of either 150 or 265 billion per year (because you "lose" the new debt, but you still have to pay the interest payments), or about triple the current budget cost of debt, or 12% to 21% of the total government budget.
The cost of making the debt fall as fast as it was rising would be 150b + 150b + 115b = 415 billion per year, call it 33% of the government budget.
In contrast, making the problem worse at the current rate has a 3% positive effect on the budget. This will not change in the near future. It's exponential and it itself rises at about 8% per year, in other words, next year it'll be 3.2% (and the government could choose to force the banks' hands to get that down)
In other words: the government will do the opposite of what everyone's suggesting here, regardless of labour vs conservatives. Either party will increase lending and make the problem worse, faster. Why? Simple: they sure as hell aren't about to give up a quarter of the budget, especially when worsening the problem actually still has a positive effect on the budget (and a strong negative effect on the problem). Note that the interest payments are actually the smaller part of this. Not borrowing fresh money is between 60% and 70% of the "cost".
Which also shows that the problem is not the rich. Well, unless you count the government. And yes, I count organizations that spend 10% more than they "can" as rich. If spending more than your fair share isn't being rich, I don't know what is.
Furthermore the "reduce debt" is a trap argument. It ignores forget ... we die. Most of UK government expenditure is labor. In other words, reducing the debt, even just stopping the rise in debt, is effectively asking us to work harder now, in trade for the country being in a (let's be honest - slightly) better position in 10 years. So you're expected to give a lot up now, in trade for giving the rich more money now (and less in the future). But you'll die, and if you're 40 or above, the calculus will show that you'll get more government services before you die at 72 if we let the situation become worse, rather than fix it.
Yes, please invest in the SPAC set up by the sons of Howard Lutnick at Cantor Fitzgerald that buys 30,000 bitcoin from Adam Back:
https://www.ft.com/content/a4a362a6-cc8b-4188-8658-75183a3d6...
Or buy world liberty tokens from Trump:
https://www.reuters.com/business/finance/uae-fund-buys-100-m...
(for context, review the leave vs stay votes by age cohort: https://yougov.co.uk/politics/articles/15796-how-britain-vot... ; roughly ~500k voters 65+ die every year in the UK: https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...)
Leaving the EU has actually helped that, because the membership payments can now be spent on general costs, and it didn't worsen trade or the economy in any noticeable way.
https://www.economicshelp.org/blog/5922/economics/uk-budget-...
While many in the EU may be sympathetic and forgiving, I sense countries like Germany and France want to ensure the UK rejoins as a far more integrated and dedicated member state than they were before. It doesn’t seem like the UK has much bargaining power in any potential application to rejoin.
The bull case for the UK is that they have an educated, English-speaking workforce and a stable legal system for protecting property rights. As they become poorer and poorer, you will be able to hire their talent cheaply as their standard of living further erodes.
Otherwise, I really don't see a lot of growth possibilities on the horizon. It is crab-mentality of taxing their richest citizens and companies ever more, but the juice is running out of that orange. So fundamental reform will eventually occur, over the shrieks and howls of the left. Reform UK is highly likely to win the next election. This isn't to say they will actually solve anything, but the pivot to the extreme right after a huge win for the left is a symptom of larger societal problems and widespread hand-wringing.
What happened is simply that conservative voters stayed home. Massive vote abstention.
If I had to pick one obvious economic problem with the UK it would be the vast economic disparity between London and most of the rest of the country and the unwillingness of successive governments to invest any significant amount of money in tackling it.
There is no cheap solution. Cutting taxes on the rich won’t magically grow the economy. That requires actual investment. However, as Liz Truss showed while trying to do something different, it’s very hard for the government to invest when any increase in borrowing leads to panic and a crash in the markets.
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The workforce and legible but only occasionally officially perverted legal system are valuable, sure, but it's the 2020s. Plenty of places can offer that. As for the pivot to the right, it's a net gain for all UK citizens who don't outwardly present as a minority or can hide it, since they can suck up to one of the few big petroleum and food exporters at a discount.
.
* footnote: It should go without saying, but Trumpism is just an expression of pre-existing vast sociocultural forces.
No it is not highly likely at all.
People who say this simply do not understand the depth of the structural challenge involved in getting from four MPs to 326 (or 325 or so if you delete the odd non-active MP).
Even if they get close but no cigar and secure a coalition it would be with the Conservatives, whose failures will not be forgotten soon.
I think it is wholly possible, alas, that Reform will see a hundred or so MPs and be the official opposition. But it should not be overstated that the Liberal Democrats will sooner offer to be in a coalition with Labour, and the country tolerate that again from them, than allow Reform the chance to undo Labour's work.
And that is before you consider that, ahem, the shine is off Reform's chums in the USA already and that situation is not going to get better soon. Reform would need a massive amount of money -- Musk money and sketchy crypto money, basically -- to get anywhere, and Trump's orange thumb on the scale with US social media firms. And we don't like that stuff. I cannot stress enough how badly that kind of intervention would go for them.
There are not many people in the UK who would say that Starmer's win was a "huge win for the left". Especially Labour voters. The "left" doesn't have much to do with it. Centrism, sanity, and the hope for an end to grift and stupidity and cruelty do. The failings of the right -- of idiots like Liz Truss and Brexit -- have more.
Reform fielded a candidate in essentially every constituency in 2024 and got five elected. One of them is sitting as an independent already because he's under investigation for corruption.
Yes, Reform got a huge swing in the local (council) elections, and some people think that is predictive. But historically it's nowhere near as predictive as Reform voters would like.
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