Keir Starmer’s promises mask a bleak future of managed decline

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Moreover, Britain is preparing to unleash a massive wave of gold sales – raising questions about who will buy British government debt and at what price. Chancellor Jeremy Hunt canceled some Truss/Kwarteng proposals which he considered irresponsible. But we are still on track to issue between £200 and £250 billion of government bonds over each of the next five years, significantly expanding our £2,000 billion sovereign bond market.

Borrowing only reached these levels during the Covid lockdown – Vacation Funding and Business Support Loans. Then, though, the Bank of England bought most of the new government paper, using the “quantitative easing” money the Bank of England had created. Now, in stark contrast, the bank is supposed to reverse QE, selling bonds to the market instead.

These realities are why Sir Keir and Shadow Chancellor Rachel Reeves are careful not to make ‘cheap’ spending commitments. However, they have already spent in their public statements “the £3.2 billion we will raise by ending non-domestic tax status for wealthy foreigners living in Britain” many times over.

Rishi Sunak, too, in a speech the day before Sir Keir, was similarly cautious about public spending. The prime minister will bear in mind that foreign investors, who account for a third of gold holdings, have recently pulled record amounts of UK government bonds – about £40 billion over the three months to November, according to new Bank of England data.

However, while Sunak pledged to reduce debt as a proportion of GDP, he did not mention that it was a five-year target – the Office for Budget Responsibility had already projected that reduction by 2024/25. Just like his promise to “halve inflation by the end of the year,” Sunak’s main financial commitment is on track to be fulfilled anyway.

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