As the Guardian noted yesterday:
Investors have rushed to take part in an auction of UK government debt today, in an sign that the new government has not upset the bond vigilantes in the City.
An auction of a new bond today has attracted a joint record of bids from investors.
The debt sale attracted over £110bn of orders, which Bloomberg reports matches a record set in June and is the biggest-ever demand compared to the size of the sale.
The Debt Management Office will raise £8bn from the bond, or gilt, which matures in January 2040 and has a 4.375% coupon (the interest payment which bondholders receive).
This could calm concerns that investors could be spooked by the new Labour government, which has said it discovered a £22bn “black hole” in the public finances.
There are three obvious points to make.
First, the City is desperate to buy savings bonds.
Second, no one believes that the government is facing an impending financial crisis, whatever Labour says.
Third, there is, in that case, no excuse for austerity.
Might Labour like to stop talking nonsense in that case? And might it now permit the issue of the savings bonds it thinks are needed to fund the level of public spending this country requires? There is no excuse not to do so.
And whilst it's at it, if it told the Bank of England to stop quantitative tightening sales demand for bonds would rise even further. In that case, every excuse for austerity would disappear. So why won't it do that? Could it be that austerity is a Labour policy and not a choice?
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In the kakistocracy that we have become, what else would one expect?
The Neo-liberals have created their own reality.
The rest of us have to live in it unfortunately.
The BBC and the Guardian (and probably others) are making much today of the estimate that pensioners will receive an additional £400 next year. I can hardly contain my excitement.
20% will go straightaway as my state pension this year is already over the tax free allowance (by £20) so my increase will be £320.
I have lost the Winter Fuel Allowance which has been £300 for me, so my increase will be £20 .
Currently it is estimated that my utility bill will increase by £200, so my increase will be -£180.
Then there will be council tax increases and food price increases are well ahead of inflation still and my water bill will increase and insurance costs.
I can hardly contain my excitement, sorry, anger.
Key information, emphasising how we are lied to by our media, and the pervasive use of PR in politics – ‘messaging’ – not facts.
Thank you Cyndy.
And the latest (“possible”? – leaked, hinted…) Hard Decision:
Drop the single-occupant 25% discount on council tax bills!
A wonderful way to give councils some extra money, without Westminster doing a thing except pass the Budget.
Whose money, then? Pensioners’ money – notably, the widowed; divorcees; single parents; the unmarried…
This one is madness….and utterly unfair
The oldest and often most needy pensioners do not receive c.13k in pension payment, the old amount is much less, also many are widows and receive only a percentage of this although if surviving to 80 they do then receive an uplift of 25p.
Agreed
It seems most ministers do not know this
I would argue that austerity is always a choice, and is only chosen if it is policy.
“For countries like the US, the UK, and Japan, the government’s financial ability to pay can never be in doubt. That’s good news because it means that citizens should never be forced to suffer harsh austerity on the grounds that the government lacks the ability to pay for health care or to pay benefits to retirees or the disabled. But that does not mean that there are no limits to what these governments can responsibly afford to spend.” — The Deficit Myth, Stephanie Kelton. https://amzn.eu/d/9GlqoVu
Austerity is a choice Ian, as you rightly point out.
Read ‘The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism’ by Clara Mattei (2022) for a thorough examination.
The people who create austerity are to me people who simply disregard their fellow human beings whilst washing their hands of any responsibility at all.
And what is worst they and austerity are are nothing but dead end.
I would expect that Reeves, or at least her SPADS and civil service advisers, have read Mark Blyth’s “Austerity” as well as the even more disturbing Mattei analysis.
(I doubt Starmer has had the time, or inclination.)
And they’re wondering why far right parties are hitting 30% + in elections…?
So why, would any sane macro-economic management, allegedly centre left,
involve austerity as a deliberate choice ?
The only answer is that Reeves is an econopath, and is deliberately acting in the interests of the owners and managers of capital, and against working people and their families, and especiallly the lower 50%, who would be Labour’s natural constituency.
Old Age Pensioners benefit OR Levelling up tax on capital gains ?
That’s no contest in econopathology.
Faced with climate change demanding lifestyles can’t continue as they currently are, the ‘Elites’ have, I gather, decided that rather than surrender their lifestyles, they’d rather surrender us. In an uncomfortable reminder of Quigley’s ‘Tragedy & Hope’ the aim would seem now to be to do away first with useless eaters, those who can’t be sent down mines and up chimneys to be exploited. The old, then, and the disabled. The approach to removal of the old appears to be already established. It’ll be interesting to see what fresh Hell the coming budget has for the disabled.
Aaaaaand – it begins. My long term experience of disability is that wherever covert sadism masquerades as kindness delivered (but of course!) in the best interests of the helpless recipient the name of Iain Duncan Smith will be in the mix somewhere. As it was, so it is as is amply illustrated by this quite lengthy piece from Hannah Sharland at The Canary “Notorious dark money think tank the Centre for Social Justice (CSJ) – founded by former head of the Department for Work and Pensions (DWP) Iain Duncan-Smith – is at its old lobbying tricks again. Now of course, it has turned its main attention towards Labour as the new party in power.” Yup, all those poor and desperate folk suffering from the theoretical living Hell of worklessness (and wholly ignoring any actual living Hells they might be going through due to their conditions) are, just as a favour to them, you understand, going to be hounded mercilessly to look for work that isn’t there which they couldn’t do even if it was https://www.thecanary.co/uk/analysis/2024/09/04/csj-labour-welfare/
My being in my early 70s means this won’t be affecting me personally but I fear for the wellbeing of all those it does.
Agreed
Labour have chosen to limit their policy options to just 1. They have chosen to take the alternative choices to austerity off the table. Austerity is their framework. All their choices they give themselves and limited to this world view. Are they providing themselves a free choice of options? No. Do they know the available alternatives? I believe no. Will they listen? They say they listen, but I believe that truth is no.
The first thing that struck me, independent of the things you pointed out, is that the government is overpaying investors. If it’s that oversubscribed could they not have offered 4.2%, or less? Its highly likely I’m missing some aspect of how this market works, of course…
At the end of WWII, the UK was broke with a national debt standing at 270% of GDP:
https://obr.uk/box/post-world-war-ii-debt-reduction/
Yet unlike today’s Labour government, Atlee’s government borrowed to invest in enlarging and improving social services, creating the NHS, greatly increasing social housing, and nationalising major industries and public utilities:
https://www.gov.uk/government/history/past-prime-ministers/clement-attlee
Surely the huge demand from private investors simply means that they expect interest rates to fall.
And then the can sell the gilts for a handsome profit.
It wasn’t demand from private investors, it was from institutions to match pension liabilities. So they will hold these gilts to maturity.
But in any case, interest rates are already expected to fall, so there will be no gain if interest rates follow their expected path.
@ MartinDO9
There is also sod-all else for investors to invest in. No commercial concern can possibly expect to thrive under the expected conditions Reeves is setting-up.
Selling top-end sports cars to bankers perhaps……. (?). Not much scope for serious investment there is there?
@Richard
“binds” or “bonds”.
Corrected
Thanks