In September 2022, when the ten-year borrowing rate spiked briefly to 4.38%, Rachel Reeves and her Labour allies practically danced on Liz Truss’s political grave, declaring that the Prime Minister had “crashed the economy.” They painted a grim picture of soaring interest rates and household misery, blaming Truss for what they called financial Armageddon.
But was that the full story? Hardly. The Bank of England had simultaneously embarked on a rate-raising spree, announced a massive sell-off of government bonds, and inadvertently unleashed chaos in pension funds with its poorly timed interventions. The bond market plunged, triggering a cascade of forced selling. Yet within weeks, the Bank reversed course, buying up bonds to stabilise the market. By November, the ten-year borrowing rate had dropped to 3.1%.
The narrative spun by Reeves conveniently ignored these factors. Instead, Truss became the scapegoat, while the Bank, whose moves were largely responsible for the brief turmoil, went largely unchallenged.
A change in Chancellor and some marginal budgetary adjustments calmed markets further, but let’s not rewrite history: the blame for the September spike was far from Truss’s alone.
Fast forward to today. The ten-year rate now sits at 4.68%, notably higher than that brief “crisis” under Truss. Yet there’s no hue and cry, no accusations of economic vandalism from Reeves or her allies. Why the silence? Because this time, the problem lies squarely at the feet of Labour’s own policies.
The Real Culprit: Labour’s Budget
The Bank of England, far from exacerbating matters, has been easing short-term rates and holding back on bond sales. Pension funds, now chastened by the lessons of 2022, are no longer the volatile players they once were. So why are borrowing rates climbing? The answer lies in Labour’s budget.
Rachel Reeves and Keir Starmer have unveiled a fiscal plan that increases borrowing, erodes market confidence, and undermines growth. Their approach, heavy on virtue-signaling but light on economic pragmatism, has sent shockwaves through financial markets. Investors see a government hooked on high spending with little regard for long-term fiscal sustainability.
Higher borrowing costs have boxed the Chancellor into a corner. Servicing the national debt will now consume a larger slice of the budget, leaving precious little room for manoeuvre. If growth remains sluggish—a near certainty given Labour’s aversion to pro-growth reforms—more tax hikes and spending cuts will become inevitable.
The Vicious Cycle of Austerity
Here lies the great irony. Labour has long castigated austerity, yet their own policies are setting the stage for its return. Higher taxes and restrained spending will choke off growth, perpetuating the very economic malaise they claim to oppose. It’s a vicious cycle, and one that Reeves seems ill-equipped to break.
A Tale of Two Crises
Compare the handling of 2022’s brief market wobble to the unfolding Labour-induced borrowing crisis. Truss’s “mini-budget” may have been poorly communicated, but its intent was clear: to spur growth through lower taxes and supply-side reforms. Labour’s approach, by contrast, lacks vision. Their policies prioritise short-term optics over long-term strategy, and the markets have taken notice.
When the borrowing rate spiked under Truss, Reeves was quick to assign blame. Yet as rates rise higher under her own stewardship, she remains silent. The hypocrisy is staggering, the double standards glaring.
The Way Forward
To escape this bind, the government must pivot to a growth-oriented strategy. That means slashing red tape, incentivising investment, and embracing policies that encourage productivity and innovation. Instead, Labour seems intent on doubling down on the very measures that are stifling economic dynamism.
Rachel Reeves once claimed that Truss “crashed the economy.” Perhaps she should look in the mirror. For under her watch, Britain faces higher borrowing costs, slower growth, and a grim fiscal outlook. The markets have issued their verdict, and it’s not a vote of confidence.
The question now is whether Reeves and Starmer can acknowledge their missteps and chart a new course. If not, their borrowing bind will become an economic noose—and the nation will be the one to pay the price.
