Really interesting read. With current economic stagnation in the UK, do you think we could be headed for an IMF bailout as borrowing costs continue to increase?
Thanks! High debt burdens raise the risk of a “doom loop:” worrying levels of debt cause interest rates to rise, higher interest payments mean governments borrow more to meet day-to-day expenditure, and debt levels rise even further.
The UK is far from IMF bailout situation, but we could be inching closer towards it with the current fiscal path the government are walking down ('tax and spend'). However, the UK risk premium is rising as investors question the government’s ability to put the public finances on a more sustainable footing. The Labour government's 'tax and spend' approach won't come without its risks.
After just a year in office, Starmer has record low approval ratings, which may make it even harder to pass unpopular measures (necessary spending cuts). It failed to pass welfare cuts earlier in the year and has very little headroom against its target of keeping day-to-day spending below the level of tax revenues over a five-year forecast horizon. Investors are now speculating about the Autumn Budget, which got pushed back to 26th November, adding to the volatility in long-dated gilts which have underperformed relative to short-dated gilts.
A similar situation is unfolding in France but they're in worse shape imo. A lack of political clarity, and even more pressing concerns over the fiscal position, have resulted in investors requiring a significant risk premium to lend to the French government over the German government.
This is my first article for State of the Debate, and something I've been wanting to write about for a while. Not enough people know about wage compression in the UK and the effects it has on workers across the income spectrum.
Great work!
Agreed!!
Great write up, really brings out the stupefying consequences of min wage policies
Agreed!
Really interesting read. With current economic stagnation in the UK, do you think we could be headed for an IMF bailout as borrowing costs continue to increase?
Thanks! High debt burdens raise the risk of a “doom loop:” worrying levels of debt cause interest rates to rise, higher interest payments mean governments borrow more to meet day-to-day expenditure, and debt levels rise even further.
The UK is far from IMF bailout situation, but we could be inching closer towards it with the current fiscal path the government are walking down ('tax and spend'). However, the UK risk premium is rising as investors question the government’s ability to put the public finances on a more sustainable footing. The Labour government's 'tax and spend' approach won't come without its risks.
After just a year in office, Starmer has record low approval ratings, which may make it even harder to pass unpopular measures (necessary spending cuts). It failed to pass welfare cuts earlier in the year and has very little headroom against its target of keeping day-to-day spending below the level of tax revenues over a five-year forecast horizon. Investors are now speculating about the Autumn Budget, which got pushed back to 26th November, adding to the volatility in long-dated gilts which have underperformed relative to short-dated gilts.
A similar situation is unfolding in France but they're in worse shape imo. A lack of political clarity, and even more pressing concerns over the fiscal position, have resulted in investors requiring a significant risk premium to lend to the French government over the German government.
Brilliant. Must read as Madmani’s NYC reign if terror looms.
Those who decry the reactionary political trend should realize they are causing it.
Agreed!
This is my first article for State of the Debate, and something I've been wanting to write about for a while. Not enough people know about wage compression in the UK and the effects it has on workers across the income spectrum.
Thanks for this AMAZING article, Les! People don't usually realise this about minimum wages!