{"id":479294,"date":"2026-06-06T12:14:18","date_gmt":"2026-06-06T12:14:18","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/479294\/"},"modified":"2026-06-06T12:14:18","modified_gmt":"2026-06-06T12:14:18","slug":"britains-addiction-to-borrowing-is-a-recipe-for-disaster","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/479294\/","title":{"rendered":"Britain\u2019s addiction to borrowing is a recipe for disaster"},"content":{"rendered":"

Is Britain about to be plunged into even greater economic chaos? Pundits have highlighted a remark made by the supposed prime minister in-waiting, Greater Manchester mayor Andy Burnham, in an interview he gave to the New Statesman<\/a> last year. The government, he said, had to \u2018get beyond this thing of being in hock to the bond markets\u2019. Understandably, the worry is that a Burnham \u2013 who, if successful in the upcoming Makerfield by-election, will likely replace Keir Starmer as prime minister \u2013 would water down Labour\u2019s \u2018non-negotiable\u2019 fiscal rules<\/a> to finance even more public borrowing. <\/p>\n

Given that Britain is already paying significantly higher interest rates on long-term bonds<\/a> than its peers, Burnham\u2019s one-liner is easy to ridicule as infantile and financially illiterate. But it must be taken seriously, not least because a hostility to bond markets \u2013 a view also championed by Green Party leader Zack Polanski \u2013 is fast becoming the orthodox position on the political left. <\/p>\n

This argument needs to be defeated once and for all. Our addiction to borrowing \u2013 a permanent feature of British politics since the Second World War \u2013 is at the root of three issues that have led us to the financial and social abyss we find ourselves in. Borrowing has become financially destructive, created a class of weak and dishonest politicians, and has entrenched a culture that has become increasingly dependent on handouts and subsidies. It must be ended. <\/p>\n

Let\u2019s start with our grim financial position. Britain\u2019s national debt has grown from the equivalent of about one quarter of national output in the late 1980s, to two-thirds shortly after the 2008-09 financial-crisis bailouts, to around 100 per cent today<\/a>. The interest on existing public debt now costs over \u00a3100 billion a year.<\/a> This makes servicing the national debt the third largest<\/a> source of government spending, after social security and health. About one in every \u00a330<\/a> of new wealth being generated is used up servicing past profligacy. In the latest financial year, 2025-26<\/a>, about six out of every seven pounds of new government borrowing went to paying the interest costs on existing debt. We are now borrowing to fund borrowing. <\/p>\n

This profligacy has been as damaging politically as it has been financially. The ability to borrow at reasonable \u2013 though now rising \u2013 interest rates has been a boon for our new class of political managers, whose technocratic impulse is to avoid making hard choices. Rather than having to cut here in order to prioritise there, they have been able to spend more on everything \u2013 on education, health, welfare benefits and pensions, on public-sector employment and on private-sector subsidies. This attitude within the ruling echelons has shielded the voters from the hard truth that no society can live beyond its means forever.<\/p>\n

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The magic-money-tree approach to public spending underpins the third, and most debilitating, consequence of endemic public borrowing: the ubiquitous handout culture. This enfeebling form of modern-day alms has sapped incentives for people and businesses. It has dulled the traditional belief that progress and prosperity require a persistent effort to overcome challenges. <\/p>\n

As the Stoic philosopher Seneca wrote<\/a>, \u2018difficulties strengthen the mind, as labour does the body\u2019. But that notion that what doesn\u2019t kill you makes you stronger has faded from contemporary life. Instead, the infantilising assumption has spread that in times of difficulty a state handout is always available, financed by borrowing. <\/p>\n

Following decades of creeping welfarism, the extensive package of handouts during the Covid-19 lockdowns<\/a> consolidated the practice of state dependence. Today, more than 24million adults<\/a> \u2013 getting on for half the 55 million adult population \u2013 receive some form of welfare. Thirteen million are state pensioners, while 10million working-age people are claimants \u2013 nearly one in every four. <\/p>\n

All these emergency rescues, public subsidies and handouts aren\u2019t cheap. Sovereign borrowing has been a tremendous enabler of the \u2018state can pay\u2019 presumption. In contrast, a government courageous enough to eschew further state borrowing, and which argues that we need to live within our means again, would demonstrate its capacity to lead Britain\u2019s national revival.<\/p>\n

Critics of government borrowing generally run up against three words \u2013 John Maynard Keynes \u2013 which supposedly render their arguments obsolete. If the greatest economist of the 20th century championed government borrowing, they insist, who are you to contradict it? But this misrepresents Keynes.<\/p>\n

Keynes\u2019s theory was that governments should borrow temporarily<\/a> during periods of economic contraction. Critically, he argued that they should run surpluses during the subsequent recoveries to pay off the debts previously incurred. The practice since the Second World War has been deficits financed by borrowing, even during times of economic expansion. In the four decades from 1945 to 1985<\/a>, British governments ran budget surpluses in only seven years. Indeed, Margaret Thatcher\u2019s single surplus year, in 1988-89<\/a>, might not have happened without the wheeze of treating privatisation proceeds not as exceptional one-off revenues but as \u2018negative expenditure\u2019. Keynes would have viewed this addiction to borrowing as mad \u2013 as indeed it is. <\/p>\n

There is one glimmer of reason in Burnham\u2019s criticism of the bond market, although he almost certainly didn\u2019t intend it. Contemporary politicians and commentators have become preoccupied by the \u2018behaviour\u2019 of financial markets, and modern political decision-making has become subordinate to what the markets will \u2018tolerate\u2019. This subservience explains why governments, going back to New Labour in the 1990s, have followed \u2018fiscal rules\u2019 to keep on the right side of the markets. <\/p>\n

The tendency to anthropomorphise markets \u2013 to attribute them with human characteristics, emotions or intentions \u2013 has a long history. The original South Sea Company Bubble<\/a> of 1720 was interpreted as a sign of undue market \u2018optimism\u2019 which was then shattered by a market \u2018panic\u2019. Ever since, people have resorted to attributing human feelings and characteristics to markets as a way of trying to make sense of economic and financial crises. Unable to fathom the underlying drivers of these events, viewing markets through the lens of human behaviour provides a language to describe what is happening. Markets are now regularly described as \u2018exuberant\u2019, \u2018nervous\u2019 or \u2018gloomy\u2019. <\/p>\n

Talking about markets in human terms has become pervasive \u2013 even in times of relative economic stability. We hear it said that markets are \u2018ignoring bad news\u2019, or are \u2018anticipating\u2019 an AI-productivity revolution. This language can offer some assurance that an unpredictable world is not quite so incomprehensible. At least the \u2018markets\u2019 know what is happening. <\/p>\n

All of this plays into the belief that markets control British politics. Burnham is right in saying that they shouldn\u2019t. But he is wrong in his implication that they should, therefore, be ignored. If he doesn\u2019t want the country to be \u2018in hock\u2019 to markets, then his first objective should be to stop borrowing from them. <\/p>\n

That\u2019s the challenge that any political leader needs to confront if they are to break free of managed decline. On their track record, neither Burnham nor any of the other existing Labour leadership candidates are up to this task. <\/p>\n

Britain doesn\u2019t need ever more borrowing to grow and prosper. What it needs most is a cultural shift to build personal and corporate self-reliance. Bond markets don\u2019t create wealth or destroy it \u2013 our destiny is in our own hands. <\/p>\n","protected":false},"excerpt":{"rendered":"Is Britain about to be plunged into even greater economic chaos? Pundits have highlighted a remark made by…\n","protected":false},"author":2,"featured_media":479295,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[207493,114,184,85,46,11730],"class_list":["post-479294","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-andy-burnham","tag-business","tag-economy","tag-il","tag-israel","tag-labour-party"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/479294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=479294"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/479294\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/479295"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=479294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=479294"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=479294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}