The destructive fools of Westminster are needlessly pushing Britain towards a gilts and sterling crisis
Daily Telegraph 10/02/26
Britain is acquiring a bad reputation for hounding its leaders out of power in rapid succession and in petulant fashion, lurching from one set of policies to another with no economic or political compass.
What I notice in my job covering the world economy is a creeping change in tone. A narrative is taking hold that this country is degenerating into an intractable and feral condition, prone to going down every rabbit hole of the culture war and lacking the discipline to see anything through.
This is a dangerous reputation to have for a country that is running a large structural trade deficit, needs constant inflows of foreign capital, and has still not expunged the stain of the Liz Truss episode.
Bond markets have become acutely sensitive to any sign of fiscal slippage anywhere on the planet. They will punish states that stray – even America, with the exorbitant privilege of the dollar.
The latest attempt by the Labour Left to topple Sir Keir Starmer and clear the way for more spending on runaway benefits and more unaffordable public sector pay rises instantly pushed up the borrowing cost on 10-year British debt to an even stiffer penalty premium over equivalent US Treasuries or Canadian, Italian, Korean, Malaysian or Moroccan bonds, for that matter. Yes, Moroccan.
Gilt yields have come off their extremes since the Cabinet gave the Prime Minister a stay of execution. But nothing is resolved and we now have a wounded leader, limping on through a political minefield, and doubtless forced to give in again and again to agitators holding a knife to his throat.
The authors of this factional palace coup have recklessly endangered a nascent economic recovery before it has reached “escape velocity”. At worst, they risk pushing us over the edge and into a downward national spiral.
Those on the political Right egging on this disgrace – deeming the worse, the better, for their own tactical advantage, or just out of frivolous pleasure – will have to live with the consequences along with the rest of us.
They are not going to get the Tory or Reform government that they want for a long time. They may instead suffer a variant of Labour for the next three years that cannot be trusted with anything – our economy, the defence of Ukraine, our fragile relations with Donald Trump – and that wishes to subcontract our laws and governance to Brussels without democratic legitimacy.
The self-indulgent antics of the Westminster class lies at the root of the political risk premium paid by the Treasury and the corporate borrowers dragged along behind.
The UK ought to be enjoying lower borrowing costs. Inflation is rapidly falling to eurozone levels. This country has a lower debt-to-GDP ratio than much of the eurozone, and the economy is performing no worse than Germany, Italy and France’s.
British 10-year yields should be some 130 basis points lower than they are today – that is to say at Belgian levels. And Belgium is no saint: it has a serious fiscal crisis.
That level would set off a virtuous circle for the UK’s public accounts and free up large sums over time for military rearmament and modern infrastructure.
We are not being treated like peer countries because the collective culture of that Gothic menagerie we call Parliament has become intemperate, squalid and destructive – from the restless benches of the House to roaming “special advisers” and the media wolf pack of the Lobby. They feed on each other in toxic triple symbiosis.
As a hard-bitten old Tory, I find myself in odd and vehement agreement with Labour’s ex-spinner-in-chief Alastair Campbell, who rants this week that “because of the nature of our politics, the quality of people going into politics, the nihilism of the mainstream media, the anarchy of social media, with dissonance, hypocrisy, short-termism, naivety, industrialised rage and wilful ignorance off the scale, we are becoming ungovernable”.
It is far from clear to me that the Prime Minister committed any sin, let alone a hanging offence. He never met Jeffrey Epstein. He is not mentioned in the Epstein files.
He took a legitimate political gamble at an earlier stage of the Epstein affair in what he thought to be the national interest, and that many deemed a political masterstroke at the time. Labour needed a world-level operator with deep reach into the US elites to navigate the perilous waters of Washington, and needed somebody with fingerspitzengefühl in world trade.
The gamble has gone wrong because Lord Mandelson deceived everybody, to the point of committing abuses that some might deem treason.
That is not in itself a reason to defenestrate a Prime Minister with a personal electoral mandate, less than a third of the way into his term, and then to impose some party hack on the nation without our say-so.
I cannot think of any other major country where such a tenuous link to a foreign scandal would set off a leadership crisis. As a citizen and a voter, my irritation is entirely directed at those fomenting this constitutional outrage.
The Tories bear much blame for normalising serial coups and for pushing the practice of crass parliamentary factionalism to new extremes.
Whatever you think about Boris Johnson, he should not have been removed over the preposterously trivial Pincher affair – which had to do with a male Tory deputy whip that nobody had ever heard of, accused of drunkenly stroking the neck and squeezing the bottom of two fellow gentlemen at the Carlton Club.
The surprise is that Labour’s insurgents have learned nothing from Tory self-destruction. If they had any economic sense or understanding of global markets they would bide their time, ignore the noise, and wait for a cyclical recovery to lift the party’s fortunes.
The coming global glut in oil and gas is likely to suppress energy costs for two or three years, acting as a tax cut and mitigating the cost of living shock that has so poisoned the political mood.
Lower short-term interest rates are on the way, or at least they would be if the Prime Minister were allowed to do his job. The housing market has bottomed out. Pent-up demand portends a sustained boom through the late 2020s.
British households and companies have been through an epic deleveraging since the Lehman crisis, cutting the private sector debt ratio by around 100pc of GDP.
Banking experts Alvarez & Marsal estimate that easier capital buffers for lenders should inject an extra £350bn into the British financial system. The stars are aligned for a powerful cycle of credit expansion. Productivity is soaring at the fastest rate in a generation as AI takes off.
Only utter fools would risk throwing this into jeopardy by precipitating a gilts and sterling crisis, and inflicting months of internecine Labour warfare on the country.
But utter fools are what these insurgents clearly are, determined not to understand that Labour was elected with just 33.7pc of the vote, or to understand that the centre of political gravity is nowhere close to their ideological agenda.
There again, a nation gets the political class that it deserves. Perhaps we all need to look into the mirror and ask ourselves how we have become such an impatient, suggestible and unserious people.
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