Rachel Reeves Has Handed Britain Over to the Bond Markets
The government’s June borrowing figures are a stark warning: Britain is drifting into a fiscal crisis not seen since the postwar era. Official data shows borrowing hit £20.7 billion in June — the second highest ever for that month, surpassed only by the COVID emergency of 2020. But this time, there’s no pandemic, no war, no natural disaster. Just a catastrophic policy misstep and the iron grip of the bond markets.
That misstep? The increase in employer National Insurance contributions introduced by Rachel Reeves in her first budget as Chancellor.
Framed as a fair-minded measure to restore fiscal discipline, the NI hike was anything but. It amounted to a stealth tax on employment — raising business costs across the board, particularly for labour-intensive industries like retail, hospitality, and care. Predictably, many firms passed those costs to consumers, fuelling a fresh wave of cost-push inflation just as prices were beginning to settle.
The impact was immediate and brutal. Index-linked gilts, which make up around 25% of the UK’s sovereign debt, responded as designed: their payouts surged in line with the rising inflation. In June alone, the government spent £16.4 billion just servicing its debt — not reducing it, not investing in growth, but simply keeping the lights on. Nearly 80p of every £1 borrowed last month went straight into interest payments.
To put it plainly: the UK is now borrowing money just to pay interest on previously borrowed money.
This is not economic management. It’s a Ponzi scheme underwritten by future generations. it is gross mis-management by the Chancellor and this inept government. And things will get worse. Much worse. The only course of action is TO REDUCE SPENDING. But the poor quality Labour MPs won’t agree to it.
And unlike most debt traps, this one is largely self-inflicted. Reeves’s NI rise was meant to signal prudence, but in trying to close the deficit, she has widened it. Not only did the policy fuel inflation and borrowing, it also choked off growth — the only reliable path out of a debt spiral.
The UK desperately needs to grow its way back to fiscal health. But how can that happen when businesses are penalised for hiring? When consumer demand is throttled by rising prices? When disposable income is squeezed between stagnant wages and tax hikes? Reeves has, in effect, tried to row upstream with a hole in the boat — and handed the oars to the bond markets.
And that’s the other half of this crisis: the government is no longer in control. In a country that must borrow heavily each year just to fund its commitments, the real power lies with the investors who buy our debt. If they sense even a hint of fiscal recklessness, yields spike — as they did during the Truss-Kwarteng mini-budget fiasco. Now, even Labour’s more cautious fiscal plans are hostage to gilt markets. Any bold initiative, any spending increase, any tax relief must first survive the scrutiny of global capital.
What’s left is a government paralysed between ambition and obligation, between the need to invest and the fear of market reprisal. Reeves may hold the red box, but it’s BlackRock, not the Treasury, that sets the terms.
This is the real danger: not just the numbers, but the surrender of sovereignty. Britain is not steering its economic destiny — it’s reacting to it. And that, perhaps more than any spreadsheet or deficit projection, is what makes this moment so perilous.
The NI increase was intended as a sign of stability. Instead, it has exposed the fragility of the entire system. Unless we change course — and fast — we may soon find that the cost of borrowing isn’t just economic. It’s national.
P.S. Angela Rayner is about to strengthen employee rights. That would be okay normally but today it is another nail in coffin for Britain as it will make it even more expensive for employers to employ. More price increases and lower growth loom.
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As I say, this mismanagement will affect us all in Britain and therefore all cat owners. It will reduce disposable income and likely affect what we spend on our cat companions. Prices in the UK are already ridiculously high. This country is so expensive now. It is horrendous.
