{"id":87896,"date":"2025-11-25T07:59:53","date_gmt":"2025-11-25T07:59:53","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=87896"},"modified":"2025-11-25T08:43:32","modified_gmt":"2025-11-25T08:43:32","slug":"the-left-is-always-playing-on-the-oppositions-turf-no-wonder-its-not-winning","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/11\/25\/the-left-is-always-playing-on-the-oppositions-turf-no-wonder-its-not-winning\/","title":{"rendered":"The left is always playing on the opposition’s turf. No wonder it’s not winning."},"content":{"rendered":"

I wondered if I was being unfair in LabourList and most commentators on the Left when posting about its commentary on bonds and their power over governments this morning, and then this nonsense, published by the supposed left-wing media publisher, Novara Media<\/a>, this week, was drawn to my attention:<\/p>\n

Many MPs will be looking for an end to the streak of savage cruelty that Reeves and prime minister Keir Starmer tried \u2013 and largely failed \u2013 to inflict on the country\u2019s poorest in an effort to balance the nation\u2019s books. Sweeteners in that direction already hinted at include, finally, the dropping of the two-child benefit cap.<\/em><\/p>\n

But it\u2019s the response from the markets, which issued \u00a3117bn of new government debt in the first seven months of this year alone, that will likely decide whether Reeves, and indeed the entire Starmer regime, survives through next year.<\/em><\/p>\n

And every indication is that those who\u2019ve loaned the government money \u2013 once largely pension funds but now cavalier, profit-maximising hedge funds and foreign investors \u2013 want to see the chancellor significantly increase the Treasury\u2019s revenue on Wednesday.<\/em><\/p><\/blockquote>\n

Let\u2019s be candid. Even though I accept that the part of the article I quote was framing, and that the author then tried to backtrack from some of the implications, the article never really moved on from these upfront suggestions, and that means that is still typical of the uncritical recycling of the neoliberal superstitions that have captured Labour, the commentariat, and, apparently, the leftwing press as well, and worthy of criticism as a result.<\/p>\n

All the basic claims in this passage are wrong, meaning they should never have been there.<\/p>\n

First, the markets do not \u201cissue\u201d government debt, as the article claims. The government does that. The Debt Management Office auctions it. The price at which it is sold is a reflection of the interest rate set by the Bank of England. It is not a judgment on the government\u2019s political fortunes.<\/p>\n

Second, the idea that \u201cthe markets\u201d decide whether a government survives is a fantasy. Democracies are meant to do that. Yet this trope is now repeated endlessly, even by those who should know better and should want better. It is as if the left has forgotten that markets are human-made institutions shaped by regulation, law and political choices. And it is as if they have also forgotten that the only reason that bond markets\u00a0enjoy their power is that politicians let them do so by maintaining their own ignorance about their purpose and functions.<\/span><\/p>\n

Third, the statement that the government has \u201cborrowed\u201d money from these supposedly omnipotent market actors is simply untrue. As I have said repeatedly, the UK government does not borrow money in any meaningful sense. It issues gilts so the Bank of England can maintain its interest rate policy; so that pension funds and insurers have safe assets to hold; and so that banks have collateral to support their lending operations. These are issues to fulfil public policy objectives, not financial necessities.<\/p>\n

To describe this as borrowing is as misleading as describing the issuing of train tickets as borrowing from passengers. Gilts are issued to meet their purchasers' needs, and not to fund the government.<\/p>\n

Fourth, the idea that hedge funds and \u201cforeign investors\u201d are now the primary holders of gilts is also untrue. Pension funds, insurers, UK banks and the Bank of England itself \u2013 via the enormous stock of gilts it still holds from quantitative easing \u2013 dominate the ownership structure. Hedge funds do not run the gilt market. They trade around the edges. They speculate. They make noise. But they do not dictate fiscal policy.<\/p>\n

So why is this narrative being spread? Why is the left repeating it?<\/p>\n

That is because, for too long, the left has absorbed neoliberal framing without noticing, and it still does. It has accepted the idea that the government is a household, meaning that it agrees with the household analogy and all the mythology that goes with it. In addition, it believes that there is a fixed stock of \u201cmoney\u201d out there to be borrowed from markets, when nothing could be further from the truth (since the demise of the gold standard, and not even then) and that these markets sit in judgement on governments like gods on Mount Olympus.<\/p>\n

None of this is true. But it is politically convenient for those who want to impose austerity, suppress democratic demands, and pretend that the state is helpless in the face of \u201cmarket discipline\u201d to perpetuate these myths, and for reasons that baffle me, much of the supposed left-wing commentariat in this country appears to want to be counted in their number.<\/p>\n

The tragedy of all this is that the left has forgotten the most basic facts of all:<\/p>\n