The race to kickstart the UK economy will determine who resides at Number 10 and for how long, as record government borrowing and soaring debt interest payments leave the next prime minister hemmed in from the start.
Record Borrowing Figures
Government borrowing reached £23.3 billion in May, £5.4 billion more than a year ago and £5.6 billion above the Office for Budget Responsibility's forecast. Nearly half of that—£11.7 billion—was central government debt interest payments, the highest for any May on record. This means the UK paid £377 million every day just to service its debt.
National Debt Nears £3 Trillion
The national debt has soared to £2.94 trillion, with the £3 trillion milestone in sight. While some of this stems from past mistakes, much is due to state intervention during crises like the 2008 financial crash and the Covid pandemic. This leaves any government constrained, forcing smart thinking rather than bold spending.
Andy Burnham's Challenge
Wannabe PM Andy Burnham, fresh from a landslide by-election win in Makerfield, faces a sobering reminder of the economic headaches ahead. Beyond the political drama, the state of the nation's finances will determine what he can and cannot do if he succeeds Sir Keir Starmer.
Bond Market Reaction
Number 10 and the Treasury are closely watching bond markets for signs of investor nervousness. Dan Coatsworth of AJ Bell noted: "Andy Burnham's by-election victory hasn't fazed bond markets, but this might be the calm before the storm. Keir Starmer has so far indicated he won't step down, which means there could be a leadership challenge and that could cause unease on the markets."
Investors hate uncertainty, and politics has a habit of making their heads spin. Much will happen politically in the coming weeks and months, with big economic implications. Ultimately, it will be the state of the economy—and efforts to kickstart it, along with possible spending cuts and tax rises—that may well determine who resides in Number 10, and for how long.
