{"id":16025,"date":"2025-07-22T17:56:20","date_gmt":"2025-07-22T17:56:20","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/16025\/"},"modified":"2025-07-22T17:56:20","modified_gmt":"2025-07-22T17:56:20","slug":"britain-is-at-the-mercy-of-bond-markets-as-debt-spirals-says-hugo-duncan","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/16025\/","title":{"rendered":"Britain is at the mercy of bond markets as debt spirals, says HUGO DUNCAN"},"content":{"rendered":"

By HUGO DUNCAN <\/p>\n

Updated: 06:35 EDT, 22 July 2025 <\/p>\n

It took the British government more than three centuries to rack up debts of \u00a31trillion. That milestone was reached in 2010, in the wake of the financial crisis.<\/p>\n

It took just ten more years for our debts to hit \u00a32trillion.<\/p>\n

They now stand just shy of \u00a32.9trillion \u2013 and will hit \u00a33trillion either this fiscal year or next.<\/p>\n

So that\u2019s another trillion racked up in less than a decade.<\/p>\n

Yes, there\u2019s the impact of inflation<\/a>. And the triple-whammy of the financial crisis, the Covid-19 pandemic and the energy shock after the invasion of Ukraine, all of which pushed the debt higher as the government borrowed to support households and businesses.<\/p>\n

But as the Office for Budget Responsibility warned in a recent report highlighting the parlous state of the nation\u2019s finances, successive governments have failed to take the action required to bring the debt back under control in the wake of those crises.<\/p>\n

\"Bond <\/p>\n

Bond markets are looking twitchy as gilt yields stride ahead of all G7 peers\u00a0<\/p>\n

Planned tax rises have been \u2018reversed\u2019, notes the OBR, \u2018and more significantly planned spending reductions have been abandoned\u2019.<\/p>\n

That the OBR pointed this out so soon after Labour watered down welfare cuts is telling.<\/p>\n

Political failings mean the national debt remains stuck at close to 100 per cent of national income \u2013 the highest level since the 1960s \u2013 with little sign of improvement in sight.<\/p>\n

And the government\u2019s annual borrowing bill has hovered around 5 per cent of GDP a year since the pandemic \u2013 levels only previously seen during recession or war.<\/p>\n

\"The <\/p>\n

\u00a0The surge in interest payments on debt is ringing alarm bells for the UK<\/p>\n

\"Public <\/p>\n

Public sector borrowing hit \u00a320.7billion last month, higher than the \u00a317.6billion forecast<\/p>\n

This is a major headache for Rachel Reeves ahead of the Budget this autumn.<\/p>\n

And that spells yet more pain for households and businesses \u2013 because however the Chancellor spins it, another round of tax rises are coming. They will be big. And they will be painful.<\/p>\n

This is because, far from being a \u2018beacon of stability\u2019 in an uncertain world, as Downing Street would have us believe, Britain is at the mercy of the bond markets.<\/p>\n

One only has to look back at the Liz Truss debacle to know that twitchy bond markets matter.<\/p>\n

And twitchy they are.<\/p>\n

To such an extent that UK gilt yields \u2013 a key measure of how much it costs the British government to borrow \u2013 are the highest in the G7.<\/p>\n

In fact, the UK has the third-highest borrowing costs of any advanced economy after New Zealand and Iceland.<\/p>\n

This is because international investors look at Britain \u2013 with its soaring debts and lack of political will to do anything about it \u2013 and do not like what they see.<\/p>\n

So they charge the UK government more to lend it money than almost every other similar economy in the world.<\/p>\n

To understand what that means one only has to look at the today\u2019s figures from the Office for National Statistics that show the UK paid \u00a316.4billion of interest on the national debt in June alone.<\/p>\n

This was \u00a38.4billion more than in the same month last year and the second highest June on record, amounting to nearly \u00a3550million a day and more than \u00a322million an hour.<\/p>\n

So we are now in a situation where we are forecast to spend \u00a3111billion this year servicing the national debt \u2013 and just \u00a362.2billion on defence.<\/p>\n

With the economy slowing, fears are mounting that the fiscal situation is getting worse not better.<\/p>\n

The scene is set for another punishing Budget this autumn.<\/p>\n

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