Since Victorian times, sandwich-board men proclaiming doom and gloom have been part of our urban street life, particularly in London, as I wrote in this week’s Spectator diary.
I’ve often felt like a sandwich-board man over recent months and years, having warned endlessly in my weekly Telegraph column that Britain is heading for fiscal meltdown.
I think it’s fair to say that here on When The Facts Change, and in my “Economic Agenda” columns in the Telegraph over several years now, I’ve done my bit to highlight the precarious nature of Britain’s public finances.
I warned as far back as September 2022, in a Telegraph piece headlined “the tumbling pound risks humiliation for Britain” – ahead of Liz Truss’s infamous “mini-budget” –that the UK was flirting with genuine fiscal dangers. It was clear back then that highly-influential global investors were starting to worry about the UK’s sovereign debt market.
Back in June 2024, just ahead of the current government’s then almost inevitable general election victory the following month, I foresaw in “Ghosts of the 1970s haunt Labour’s resurrection” that Keir Starmer’s party, with Rachel Reeves as Chancellor, “could soon face borrowing difficulties”.
In January 2025, I declared explicitly and not for the first time – in a piece entitled “We face a return to 1976 unless Reeves changes course” – that Labour was borrowing and spending far too much, and that the UK economy, in the aftermath of the Chancellor’s tax-hiking October 2024 budget, was in danger of stalling – given the debilitating impact of ever-rising tax rates on economic growth.
“Yes, the Tories left the public finances in a mess but Labour then hiked borrowing and spending much more,” I said in that Telegraph column sixteen months ago. “If Reeves and her ideologically-driven acolytes double down and think they can ignore what the markets are saying, then we do face a return to 1976” – which was, of course, when the UK faced the ignominy of declared itself effectively insolvent, going “cap in hand” to the International Monetary Fund for a bailout.
It brings me no pleasure that many of the dangers I warned of, to such derision, now dominate the mainstream news. The big global pension funds and insurers that lend governments serious money are deeply unimpressed with Labour’s huge borrowing and spending rises and growth-sapping tax hikes.
That’s why the UK government’s 10-year gilt yield is now testing levels not seen since 2008, with longer-term borrowing costs at a 30-year high.
Of the £132 billion Labour borrowed during the fiscal year to March, a jaw-dropping £110 billion went on debt interest payments. That’s almost the same as state education spending and twice what the UK spends on defence.
Yes, the Tories left national debt north of 90 per cent of GDP. But this economically naive government has made a bad situation much worse. Now, with Labour lurching further left after getting hammered in last week’s local elections, the markets are calling time.
I really don’t like being a “sandwich board” man. I am a naturally optimistic person – “glass half empty” is not my style. I remain convinced that the UK is a great place to live and work – we still boast many world-class companies, top universities, great scientific and artistic acumen and a raft of small- and medium-sized businesses run by driven and talented entrepreneurs.
But, it strikes me that, for quite a few years now, any economic success we have had in the UK has been despite rather than because of government policies. Under the Tories and now Labour especially, the state has become far too big, intrusive and now disastrously unaffordable.
Yet it is now clear – with an ideologically-blinded Labour party taking precisely the wrong lessons from its huge losses in last week’s local elections, and the surge of Reform UK – that Keir Starmer will soon be replaced by party leader and Prime Minister by someone who is even more leftwing that him, as I’ve often predicted, including last week, on When The Facts Change.
Leadership rivals including Manchester Mayor Andy Burnham, Energy Secretary and net-zero acolyte Ed Miliband or former Deputy Prime Minister Angela Rayner would all crank up borrowing and spending even more than Labour already has since taking office in July 2024.
Back then, the Office for Budget Responsibility (OBR) was forecasting state borrowing of £323 billion by the end of the fiscal year 2029. Now, Labour’s higher borrowing and spending, along with its other big-state growth-crushing policies (which curtail tax revenues due to less activity), the same official five-year borrowing forecast is now £583 billion – a staggering 80pc higher .
But that’s not enough for the trade unions plus Labour MPs and activists who will determine who take over from Starmer. They want even more! Some say Starmer’s replacement could be “Blairite” Wes Streeting, who resigned as Health Secretary this week, writing an open letter to the Prime Minister.
But I can’t see that happening – and the only way it could is if Streeting signs a Faustian pact with the left of his party, totally hemming him in.
A big reason I’ve become a sandwich-board man is because I am constantly amazed at the lack of economic and financial literacy of our political and media class. Very few journalists have also been prepared to speak out about the dangers of too much government borrowing and spending.
Over the last few days, idiotic Labour MPs have been saying saying that global bond markets, having already pushed up UK borrowing costs to easily the highest in the G7, will “have to fall into line” with an even more left-wing borrowing-and-spending agenda.
One is shocked not just by to abject ignorance of these people – but their astonishing arrogance, to opine publicly about important issues about which they clearly know absolutely nothing.
But these are the people who will decide who will soon be leading the world’s sixth largest economy – the public finances of which, bloated by speculative money, leverage and far too much potentially explosive index-linked debt, are now firmly in the cross-hairs of international capital markets.
The UK is now at the mercy of its international creditors due to governments of all colours borrowing far too much, egged on by a political and media class that thinks the answer to every problem is "more government spending"
This is reality – and we have no-one to blame but ourselves. Someone has to keep highlighting that reality – in the face of a political and media class which, for the most part, is determined not to listen.
