Since Victorian times, sandwich-board men proclaiming doom have been part of our urban street life, particularly in London. I’ve felt like a sandwich-board man lately, having warned endlessly in my weekly Telegraph column that Britain is heading for fiscal meltdown. In June 2024, just before Labour took office, I signalled that a government led by Keir Starmer ‘could soon face borrowing difficulties’. Six months later, I cautioned ‘we face a return to 1976 unless Labour changes course’ – recalling that 50 years ago, Britain was forced to declare itself insolvent and go to the International Monetary Fund for a bailout.
It brings me no pleasure that many of the outcomes I warned of, to such derision, now dominate the news. The big global pension funds and insurers that lend governments serious money are deeply unimpressed with Labour’s huge borrowing and spending rises and growth-sapping tax hikes. That’s why borrowing costs are at a 30-year high. Of the £132 billion Labour borrowed during the fiscal year to March, a jaw-dropping £110 billion went on debt interest payments. That’s almost the same as education spending and twice as much as we spend on defence. Yes, the Tories left national debt north of 90 per cent of GDP. But this economically naive government has made a bad situation much worse. Now, with Labour lurching further left after getting hammered in last week’s local elections, the markets are calling time.
