The game’s Bonds, Gilt Bonds markets
The Chancellor’s speech started with (bare with me); “Setting out plans for growth, This government’s direction for growth, that will see growth in more places in future. […] growth driven from more places in the UK”.
In case you missed it then, the government will continue the previous administration’s focus on… “growth”. He also unequivocally stated a commitment to the previous Chancellor – Rachel Reeves’ – self-imposed strait jacket, aka the “fiscal rules” which require the government budget to be balanced by 2029/30, debt to fall, and certain welfare spending to stay capped.
These restrictions were introduced as a way of “calming the bond markets”. What does that mean? Well, bond markets are essentially a way for the government to take out loans from private investors, pension funds and banks. Keeping them “calm”, means reassuring investors that the UK government and economy is a safe bet. That’s because the more confident those investors are, the lower the interest rates they demand, and the easier it becomes to service debt and reinvest.
And that’s how we arrived here, with abstract “growth” rather than, say, higher living standards, being the primary driver of government policy. The idea being if the economy is bigger, and more money is moving around it, then tax receipts will be higher and there’ll be more cash to pay off debts. Similarly, if government spending is lower, then there’s more cash available to pay creditors. After 14 years of austerity under the previous Conservative-led governments we know that cutting spending and government investment hurts us in the short and long-term, and undermines growth. The current approach risks cutting ourselves further into stagnation.
We need to remember that inspiring confidence in the bond markets, means building a country that works. Healthy, skilled workforces, decent transport, affordable energy, strong public services— these are the building blocks of a thriving economy. Slashing social security, for short‑term savings, and pushing people deeper into poverty, cutting infrastructure doesn’t grow an economy. Investment does.