The UK government is in a debt spiral with no way out, because the Labour Party refuses to consider spending cuts. From Alasdair Macleod at alasdairmacleod.substack.com:
On Wednesday, UK taxpayers will learn how their government intends to pick their pockets in the next tax year. The economic and political consequences are likely to be brutal.
The chart of the UK’s ultra-long gilt sums up the chancellor’s dilemma when she delivers her budget (officially the Autumn statement) on Wednesday. Not only is the cost of government borrowing remaining stubbornly high, but any competent chart analyst will tell you that it is set to go significantly higher. Already, the Office for Budget Responsibility (OBR) estimates that interest at £111.2bn and 8.3% of total public spending is one of the largest items in annual managed expenditure.
The chart says that will increase significantly, and that the cost of funding an expected gross financing requirement of £271bn in fiscal 2026/2027 (including replacing maturing debt) will be much higher than the OBR’s estimate. Furthermore, the Treasury underwrites the Bank of England’s losses on its QE, which is adding to the pain.
It doesn’t stop there. Elsewhere, we estimate far higher rates of CPI inflation for the US, and unless sterling rises against the dollar this will be replicated in the UK. This matters because one third of the £2.7 trillion government debt is index linked. An unexpected fall in the sterling exchange rate will compound the UK’s debt woes, not least because the foreign buying of gilts which will be necessary to fund total borrowing will be scared off, becoming sellers instead.
In short, unless the chancellor can pull a blinder of some sort and get away with it a funding crisis is set to develop following the Autumn statement.
But muh glorious Northern Eurasia partition of RF?
Keep calm and perfidious Albion.
Thank You ancestors for getting the hell out of there.