The bond market plays a crucial role in shaping government spending decisions – but how much power does it really have? With a Budget around the corner, are investors or Rachel Reeves setting the limits on fiscal policy?
In this episode, we unpack how the government borrows, why it’s so expensive right now, and what “fiscal credibility” really means. Joining Helen are Jack Meaning, Chief Economist at Barclays, and Ben Zaranko, IFS, to discuss the state of the bond market, the lessons from the Liz Truss era, and what investors will be watching for in the 2025 Budget.
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00:00 – Introduction
1:42 – What is a bond?
5:55 – What’s happened in the bond market recently?
9:04 – Changing role of DB pension schemes
11:55 – The Truss era
16:13 – Are we still paying the price today?
18:48 – Is the UK in hock to the bond market?
23:20 – What will investors be looking for in the Budget?
29:50 – The dynamics around the Budget
35:48 – Does political uncertainty affect the market?
38:15 – Conclusion
We are no longer a sovereign nation. Here, the IFS lazily falls back on why we have to be in hoc.