{"id":538830,"date":"2026-04-19T04:18:08","date_gmt":"2026-04-19T04:18:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/538830\/"},"modified":"2026-04-19T04:18:08","modified_gmt":"2026-04-19T04:18:08","slug":"we-dont-act-like-a-serious-country-look-at-our-borrowing-splurge","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/538830\/","title":{"rendered":"We don\u2019t act like a serious country. Look at our borrowing splurge"},"content":{"rendered":"

Back in the 1990s, an Australian called Bill Morgan won a new car worth $30,000 in the lottery, after surviving a brush with death. A news channel asked him to re-enact his purchase to illustrate the story. Scratching off the foil, he discovered he\u2019d won another $250,000.<\/p>\n

If there is a karmic opposite to Morgan \u2014 rapidly dubbed \u201cthe world\u2019s luckiest man\u201d \u2014 it is surely Britain\u2019s own Rachel Reeves<\/a>. After a torrid period in office, GDP figures published last week<\/a> confirm that the economy was just starting to edge back into proper growth over the first three months of the year. And then: whammo.<\/p>\n

The Chancellor, inevitably, is blaming the subsequent hit to the economy on global shocks in general and Donald Trump in particular. And there\u2019s obviously a lot of truth to that. But there are two pretty significant objections.<\/p>\n

The first, inevitably, is that Reeves \u00ad\u2014 and Labour \u2014 proved less than willing to attribute Britain\u2019s economic problems to global events when they themselves were in opposition. But the second, and much more significant, is that this global shock seems to have been particularly shocking here in the UK.<\/p>\n

When the Iran crisis erupted, the IMF and OECD downgraded everyone\u2019s growth. But of the big economies, they both downgraded Britain the most. The IMF now expects us to have the lowest per capita growth in the G7 this year, and the joint highest inflation. And those inflation expectations helped ensure that our borrowing costs, which were already higher than everyone else\u2019s, grew higher still.<\/p>\n

In other words, both the markets and the experts seem to have decided that Britain was uniquely vulnerable to this shock, or uniquely ill-prepared for it, or both. But why?<\/p>\n

Many of the explanations are obvious, and familiar. We are an open, trading economy that tends to suffer disproportionately from international disruption. We have swung over the past 20 years from being a net exporter of energy to a net importer, on a colossal scale: we now get roughly 44 per cent of our energy from overseas, not least in the form of Norwegian oil and gas from the same North Sea<\/a> we are too virtuous to drain ourselves. And of course such imports became much, much more expensive when the crisis erupted.<\/p>\n

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But even before the bombs fell, the debt markets were treating Britain as an outlier (or, if you\u2019re less kind, a pariah). Most obviously, by charging us more to borrow than others. But also in their willingness to be spooked. As the bond market expert Mohamed El-Erian wrote last week, \u201cthe UK sovereign debt market has gone from a bedrock of the economy to a temperamental asset class that overreacts at the slightest provocation, both on a standalone basis and relative to other government bond markets\u201d.<\/p>\n

And it\u2019s not just about the bond markets. The US mega-bank JP Morgan monitors the number of days in which a country\u2019s stock markets, debt markets and currency all fall at the same time. This, it says, is the best metric of \u201cfiscal stress\u201d: essentially, how jittery the markets get about whether countries can make the numbers add up. Traditionally, Britain has moved in lockstep with the US on this index. But over the last few years, our performance has been much worse, to the point where \u201cthe United Kingdom is starting to appear closer to an emerging market such as Brazil\u201d.<\/p>\n

How come? Reeves insisted that \u201cwe entered this conflict in a stronger position because of the choices this government took to build economic stability\u201d. But the markets emphatically don\u2019t agree. \u201cFor over a decade,\u201d wrote El-Erian, \u201cthe UK has failed the basic test of debt sustainability: borrowing too much while growing too little.\u201d Indeed, when you look at the detail of that borrowing, you can see why many people are alarmed. In February, the UK borrowed \u00a314.3 billion, the highest non-pandemic total for that month since records began. As the economic commentator Liam Halligan has pointed out, \u00a313 billion of that was to service the existing interest on our debt. We are borrowing to pay for borrowing, a story that never ends well. Moreover, an abnormal proportion of that debt \u2014 25 per cent, versus the more usual 3 to 8 per cent \u2014 is index-linked, meaning that it will be harder for us to inflate it away.<\/p>\n

What all of this boils down to, sadly, is that we\u2019ve stopped behaving like a serious country. Our overall debt position isn\u2019t as bad as some. But our trajectory is much worse. Because instead of building up savings for a national rainy day, we run our economy on the never-never.<\/p>\n

We splurge on debt in a crisis, but never run the surpluses to restore the public finances. We ran down our military to fund an ever-expanding welfare state, then quailed at the prospect of cutting off the flow of benefits, both to those who won\u2019t work, and to pensioners who demand an ever-greater share of national income via the triple lock. We adopted a system of climate accounting that saw importing gas rather than producing it as a planetary win. We failed to build. And we refused, and are refusing, to confront voters with the fact that a country really does need to live within its means.<\/p>\n

Of course, this isn\u2019t just Labour\u2019s fault. It was the last government that decided (among many other things) to run the public finances on the thinnest possible margin. And it\u2019s not exactly a new point: many of us have been making these arguments for ages.<\/p>\n

But it really matters. Our politicians, including Reeves, keep saying that Britain needs more resilience. But they keep failing to deliver the most basic form of it: a set of public finances that gives us the scope to cope with sudden shocks, and an economy that isn\u2019t blown off course by the slightest blast of inflation.<\/p>\n

As I write, it looks as if Trump and the Iranians may be inching towards a diplomatic resolution. Which is pretty lucky, because even though the government had found \u00a3600 million a year to help manufacturing businesses, any sort of wider energy bailout was off the table. Because we simply haven\u2019t got enough cash.<\/p>\n

Looking at the local election campaign last week, with its parade of joke announcements from joke parties \u2014 salary caps from the Greens, food price controls from the SNP, a \u201cno doctors, no development\u201d promise from the Lib Dems that was somehow even more stupid and slapdash than either \u2014 it was tempting to despair of Britain. Looking at the financial news, it feels like many traders already have.<\/p>\n","protected":false},"excerpt":{"rendered":"Back in the 1990s, an Australian called Bill Morgan won a new car worth $30,000 in the lottery,…\n","protected":false},"author":2,"featured_media":538831,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[59,57,58,50,56,54,55],"class_list":["post-538830","post","type-post","status-publish","format-standard","has-post-thumbnail","category-united-kingdom","tag-gb","tag-great-britain","tag-greatbritain","tag-news","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/538830","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=538830"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/538830\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/538831"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=538830"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=538830"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=538830"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}