No Answer Andy and the £3 Trillion High Wire Act.
Welcome back, dear readers, to another riotous week beneath Westminster’s Big Top of Blunders, where the Treasury trapeze artists are dangling above a mountain of debt, the tax contortionists are bending themselves into increasingly unnatural positions, young people are being shown towards the employment exit, and No Answer Andy is discovering one of the less enjoyable features of being ringmaster, the bond market does not applaud on command.
This week, the circus acquired a particularly ominous soundtrack. UK borrowing costs surged to levels not seen for nearly two decades (basically since the last time Labour were in power).
Ten year gilt yields briefly climbed above 5.29 per cent, their highest since 2007, while 30 year borrowing costs hovered around levels last seen in 1998. Britain was caught in a wider global bond sell off, driven by renewed Middle East conflict, higher oil prices and fears of persistent inflation, so it would be nonsense to pretend Burnham personally caused every twitch in the gilt market. But Britain’s weak fiscal position leaves it painfully exposed when the weather turns. Higher yields mean higher debt interest costs and less room for the Government to spend elsewhere, with estimates suggesting Chancellor John Healey’s fiscal headroom could be roughly halved.
And there is the problem. The circus already has an enormous elephant in the tent marked DEBT, yet Labour keeps behaving as though the answer is to squeeze another clown onto its back.
Prominent economist Arthur Laffer warned this week that Britain risks “taxing itself to death”, arguing that further tax rises would weaken growth rather than rescue the public finances. Economists can and do disagree vigorously about where the revenue maximising tax rate lies, but the underlying point is hardly revolutionary. There comes a point when continually increasing the burden changes behaviour, deters investment and makes the economy less dynamic. You cannot keep feeding the Treasury lion chunks of the productive economy and then look surprised when there is less productive economy left.
The tragedy is that the people paying tomorrow’s bill are already struggling today. Warnings that youth unemployment could rise beyond 800,000 should be setting off alarms across Whitehall. Employers have faced higher labour costs, while graduates and school leavers are trying to get a foot onto a career ladder whose bottom rungs increasingly appear to have been removed. Britain desperately needs a generation of taxpayers, entrepreneurs and wealth creators. Leaving hundreds of thousands of young people without work while government debt approaches £3 trillion is less an economic strategy than an intergenerational circus trick, today’s audience enjoys the performance and tomorrow’s audience receives the invoice.
Meanwhile, Angela Rayner’s department found itself back under the spotlight over Labour’s proposed definition of anti Muslim hatred, after controversy over the destruction or deletion of material relating to the process. Whatever the administrative explanation, governments should understand by now that the phrase “the evidence no longer exists” has approximately the same reassuring effect on the public as a circus magician announcing that the rabbit has unfortunately been shredded. When a politically sensitive definition potentially touches free expression and public policy, transparency should be the easiest part of the exercise, not another disappearing act.
Then, through the curtains, came the Ghost of Ringmasters Past.
Sir Keir Starmer has now quit as an MP, just weeks after indicating that he intended to remain in the Commons. Politicians are perfectly entitled to change their minds, particularly after leaving the premiership, but it provided one final flourish from a political career increasingly decorated with U turns. After 107 weeks of Clowning Street, Two Tier Keir finally packed away the oversized shoes, folded the tent and left the parliamentary circus altogether. Somewhere backstage, the Conservative Post balloon modeller has presumably been instructed to remove his name from future orders.
Energy, unfortunately, is considerably less amusing. Britain has been reminded again how vulnerable it is to international gas shocks. The latest surge in energy prices following renewed conflict in the Middle East has fed directly into inflation fears and the bond market turmoil now squeezing the Treasury. Britain cannot insulate itself completely from global energy markets, but decades of arguments over domestic production, storage and energy security look rather less academic when geopolitical trouble arrives and families start wondering what it means for their bills.
And then there is food. After an exceptionally dry summer, farmers have been dealing with drought conditions, shortages of grazing and fodder, fire risk and pressure on crops. The Government has responded with temporary flexibility in environmental farming schemes and a £65 million support package, while Defra says there is currently no indication that UK food security itself is at risk. That distinction matters. But so does the wider warning. Food does not magically materialise on supermarket shelves because somebody in Whitehall has written a strategy document. Farmers need viable businesses, workable regulation, water, investment and confidence that producing food in Britain is something governments actually want them to do.
And that rather sums up Week Seven.
Britain wants growth while borrowing costs soar. It wants young people working while employers worry about the cost of hiring them. It wants tax revenue while economists warn against squeezing the tax base ever harder. It wants energy security while remaining vulnerable to international shocks. It wants food security while farmers battle an extraordinarily difficult year.
You would need three contortionists, two trapeze artists and a particularly talented balloon modeller to make all of that look like a coherent economic act.
No Answer Andy remains in the centre ring, of course, smiling reassuringly as the orchestra gets louder. Around him, the Treasury jugglers are tossing £3 trillion of debt through the air, the tax clowns are checking whether anybody in the audience still has a wallet, and the bond market is standing at the back of the tent with its arms folded, distinctly unimpressed.
The Big Top is still standing. But this week the guy ropes got rather more expensive and some look as though they are about to snap.
READ ALL ABOUT IT: Links to this week’s top Labour circus acts below:
