We have often discussed the surge in debt interest. Most who contribute here agree the first task for any government concerned about it is to curb public spending. The second is to set tax rates people and companies will stay to pay. Lifting the bans on oil and gas exploration and development would also boost revenues.
The way the debt is issued and managed could also be improved. The authorities are very inflexible most of the time, issuing bonds of short,medium and long duration in roughly equal quantities. I argued when they had taken rates very low they should have issued a lot more long dated. This would have locked in cheap debt for many more years. Today with the obvious pressure on long dated I urge them not to issue longs. Why lock into high rates when you want to get them down?
There is also the question of index linked debt. The UK has issued more of this relative to size of economy than others. When the Bank helped put inflation up to 11% the costs of this debt became penal. I propose a period of no issuance of indexed bonds to adjust.
I would make an exception for National Savings. To relieve a bit more pressure from the bond market I would launch new issues of index linked National Savings to let individual savers have that choice in the way institutional investors do.
August 20, 2025
Good morning
The government is robbing Peter in order to pay Paul. Only Peter is struggling to keep his head afloat.
We all here know where cuts need to be made but political doctrine and ideology keeps the government from making these difficult decisions.
Everyone can see where we are heading and those with means to jump ship either gave or are planning to do so.
I cannot believe I am about to say this but, I really underestimated Rushi Sunak. Calling it quits before his term was up will be seen as a political master stroke.
August 20, 2025
It’s time the 50k limit on Premium bonds was increased. No doubt Rachel from complaints would then tax the prizes
We are currently paying over £100 billion annually in debt repayments. This is being borrowed and unsustainable.
The sooner the bond vigilantes wake up the better.
August 20, 2025
Reform can precipitate things by declaring a cap on the yield a Reform government will honour. If the current government lets borrowing soar, the bond markets will then be forced to accept a lower rate or else the government will be forced to restrain spending.
August 20, 2025
The latter would apply. Markets would demand a risk premium for excessive borrowing, as they are now.
August 20, 2025
but then all the people (thousands) who have over say £40k worth might ‘invest’ another £100k to avoid bank account balance tax. That would mean all the ‘under £10k’ buyers would seriously miss out on prizes. An odd Laffer curve might occur where it is no longer attractive or fun, to have any under say £20k.
August 20, 2025
The story of Bunter and Sunak period in office, particularly over Covid, is yet to be written. The money wasted was out of all proportion. Who was responsible, why, and who benefited? Sunak held the purse strings and has a lot of questions to answer.
August 20, 2025
Sunak made huge mistakes £400billion on net harm vaccines, net harm lockdowns and Covid “loans” many never to be repaid. He absurd statement to the house that Covid “vaccines” were unequivocally safe was absurd.
But worse of all was his throwing the towel six months early. Sunak should have ditched net zero, taken radical emergency action against open door immigration, promised vast cuts in taxes, abolition of IHT and large cuts in the vast swathes of government that do no good or net harm and have done a deal with Reform. But the man together with Hunt was an inept tax to death, net zero pushing con-socialist. Two dire deluded PPE graduates! He might still not have saved us from Starmer but he would not have stopped the appalling landslide!
August 20, 2025
Debt interest is largely about confidence in Starmer and Reeves – there is quite rightly almost none!
August 20, 2025
Mark B : “PM Sunak went to the country 6 months early because he thought that the Rwanda plan might just work and he wanted an incoming Labour administration to arrive in time to cancel it.”
PM Sunak went to the country 6 months early because he thought that the Rwanda plan might just work and he wanted an incoming Labour administration to arrive in time to cancel it. If it had worked, I expect we would still have a Conservative government now.
August 20, 2025
Sunak jumped out of the hot water pan like a frog sensing he shouldn’t stay much longer.
August 20, 2025
“…to let individual savers have that choice in the way institutional investors do.”
There are various investments where institutional investors have more choice than the rest of us. Obviously they are much bigger fish, but sometimes it smacks of a rigged market in order for them to exclude us, make more money than us, and be forced to use their services.
August 20, 2025
Apart from mortgages and car purchase in the distant past, I found that debt is something best avoided. Since gold as a standard was put aside, the conjouring of money for profligate government is something I know little about, except to say I find it a very bad financial practice.
It has lead to an enormous national debt that needs to be constrained and reduced. On a personal level I did it by earning far more than conventional employment allowed. The country needs to do the same. This demands government changes on the scale of near revolution.
After WW2 , I got the impression that our considerable war debt was compartmentalised and steadily paid off over many years. Effectively removing it from Current Account debt. I have no idea what the mechanism was, but it strikes me that we need to do something similar with what I will describe as Covid debt. Additionally government mindset must change from one of spending to one of earning. As current government has no experience of such a concept, we the tax payers, the only means of change, must suffer until they run out of political currency. I only hope Nigel and his team fully appreciate the enormity of the task. Clearly nobody else does.
Reply Debt is debt however incurred. The interest has to be paid.
August 20, 2025
R to R
We are all too aware of what you say. However, what was the mechanism for the repaymenf of our war debt. Did we fix the interest and let time, through inflation, reduce the value of what was owed?
August 20, 2025
The size of the national debt, now about £2.6 TRILLION, means that the government has to find about £120bn in interest payments each year. The government has to borrow the £120bn to pay lenders their interest. This gets added to the principal, making the debt worse. We end up paying interest on the interest. Hyperinflation looks inevitable, which is why holding gold bullion/sovereigns/krugerands seems a good idea
I am extremely suspicious of investing in debt. But it’s worth noting that the spread between corporate bonds and government bonds has narrowed in recent years. Personally, I would not lend my money to the government in the form of National Savings.
August 20, 2025
The debt is safe while our credit rating remains strong. We can always print to pay.
Labour’s growth strategy makes our credit rating less secure.
August 20, 2025
John, this Labour Government are absolutely clueless about managing finance, shown by the fact that they do not want to cut expenditure at all, and are now looking at ever more legal ways of stealing the money of savers, investors, pensioners, and workers.
The latest proposed schemes of an annual wealth tax on properties over £500,000, and or removing the so called “profit” on the family home when sold, show just how desperate this lot are at trying to raise money.
What they are looking at is exactly the opposite of what is sensible, and that would be to remove the principle family home from IHT all-together, as its cost variation is largely regionally based.
August 20, 2025
Putting Capital Gains Tax on the family house owned for many decades, would be the biggest reason to never move house at all, are they really that blind and stupid ?
Just because you own a family home of some value does not mean that you are automatically wealthy and have a huge income.
Many pensioners have saved all their lives to be able to live mortgage free, because they know they will be cash/income poor when they eventually stop work.
Those who are younger and still working with a mortgage, will need even more income to pay an extra House tax, the whole idea is a nonsense, especially when Council tax is in effect a wealth tax already.
August 20, 2025
True. Just like owning the working farm which might be valuable as mere land, it might not! How to separate the farmhouse from the worked land. An asset that enables small income.
August 20, 2025
@Berkshire Alan – strange that what they wont do is manage expenditure, they wont actually ‘budget’ as the rest of the country is doing. To meet their every increase tax demands the average citizen is cutting back watching what the spend and working harder to stay afloat within budget. These loonies have are just pouring all that effort down the drain without a care.
August 20, 2025
Ian B
Hardly and incentive for the younger members of our Society to invest, save, work hard, and strive to better themselves and their families.
Looking at our finances now, our Daughters have remarked ” is it all worthwhile when the Government wants to take the major share of everything you have worked hard for ”
I have to say if I knew then what I know now, I would have chosen, and made different financial decisions and options. I may even have ventured abroad.
Government policies now being discussed are nothing less than legalised theft and robbery from the population.
August 20, 2025
President Trump during his first term also urged the issuance of much more longer dated debt when interest rates were 0. But the ‘experts’ were dismissive and ignored him. A good topic for a book by some budding economist one day could be to quantify the cost of following ‘expert’ advice as opposed to common sense centre right alternatives on offer at the time at least in the UK: ERM + gold sell-down + bank bailouts + foolish debt management + covid lockdown + net zero + mass immigration + dysfunctional tax policies + regulatory overreach = ? Something very large and costly I’m afraid.
August 20, 2025
Index-linked debt is useful in providing inflation protected annuities. Perhaps its sale should be restricted solely for that purpose. At least then the government can expect to get something back by way of income tax.
August 20, 2025
Governments of all colours are addicted to bribing voters with their own money.
The want to be liked and to be seen to be benevolent.
Time to change – defend the country, enforce law and order (on the streets not online other than financial misconduct) educate the young, look after the infirm and elderly.
That is all government should be doing It shouldn’t cost that much and certainly shouldn’t involve weather or nudging.
August 20, 2025
July’s Retail Price Index figure (just reported) increases to 4.8 per cent. so the index-linked debt costs are on the up, offset only by the Bank’s too eager rate cut on 7, August.
Will we now hear much talk of black hole, first woman, growth to help us through?
August 20, 2025
Prices rose at an annual pace of 3.8pc in July, according to the Office for National Statistics (ONS), up from 3.6pc in June and higher than analysts’ predictions of a climb to 3.7pc.
Food inflation increased from 4.5pc to 4.9pc, the highest level since February last year.
Closely-watched services inflation rose faster than expected from 4.7pc to 5pc, as businesses were hit with higher costs.
Costs are rising as more money is taken by an ‘out of control’ government that keeps removing money from the economy.
No management, no budgeting, just spend and borrow
August 20, 2025
Also begs the question as to what the BoE is doing to control inflation as per their contract with us all. Oh.. that’s right they reduced the rates to stoke inflation.
August 20, 2025
Amusing read in the DT…
The chancellor insisted Labour had been “creating more jobs” since entering office even as official data showed the UK’s unemployment rate remained stuck at a four-year high in the three months to June.
Most of us know these are new jobs working for the State. While the rest of the country declines and tries to make ends meet because she doesn’t care, if you are not beholden to the State you are not a Labour supporter
August 20, 2025
Daniel Hannan wrote in the DM Saturday that to solve this borrowing nonsensical situation the best hope for the country maybe a financial crisis to evict this government. Labour meanwhile go on holiday, heads in sand.
Where’s Rachel?
On walkabout creek….
August 20, 2025
This is a greedy government that only looks out for what it can tax and steal from hard-working taxpayers. It never looks inward at the crazy spending it inherited and has increased. When you are borrowing money to pay interest on your debts, you are in real trouble, whether as a government or an individual.
We are not far from the bond markets demanding ever higher interest rates on government borrowing.
Equally, we are not far from the IMF having to step in and cut spending.
This government has done more damage in 14 months than the Conservatives did in 14 years!
August 20, 2025
From the Telegraph
“When Sir Keir Starmer took the stage at the 2023 Labour conference in Liverpool, he promised voters he would solve the cost of living crisis if elected.
Rapid inflation “intrudes on the little things we love,” he said. “Whittles away at our joy.
“Days out, meals out, holidays [are] the first things people cut back on. Picking up a treat in the supermarket just to put it back on the shelf.
“We have to be a government that takes care of the big questions so working people have the freedom to enjoy what they love,” he vowed.”
https://www.telegraph.co.uk/business/2025/08/20/why-britain-is-suffering-the-highest-price-rises-in-europe/
New figures confirm just how bad things are: the UK’s rate of inflation is far higher than elsewhere in Europe and among G7 rivals.
Yet support for Labour, the Workers Party remains as solid as it was at the last election. How many workers are there in this Labour Government certainly none at the top table. What did the Unions think they were funding, people like themselves and their members? What did the Unions think about as they handed over membership money? Did they thing they were getting people like themselves, the salt of the earth grafters. They need to take a hard look at who they give their members money to in future, this the second member of the legal profession that has screwed the very people whose money they took, a high earning glossy talking spivs can’t wouldn’t know how to get down with the workers.
August 20, 2025
Dear Sir John,
I recall a statement, perhaps around autumn 2021, that the DMO was going to axe new index-linked borrowing. This told me that the Treasury obviously expected inflation to rise sharply – and so it proved. There could hardly be a stronger signal to the markets.