For decades, a spectre has haunted the corridors of Whitehall and Treasury – the fearsome ‘bond vigilante’. This mythical market monster, it is said, will immediately punish any government that dares to borrow to invest, sending borrowing costs spiralling and triggering economic doom.
But what if this terrifying creature is nothing more than an economic fairy tale, a convenient phantom used to enforce a damaging status quo of austerity and underinvestment? In a powerful editorial, The Guardian argues it is precisely this irrational fear that is crippling Britain’s potential.
The High Cost of a Fiscal Phantom
The concept is simple yet powerful: if a government borrows too much, mysterious ‘vigilantes’ in the financial markets will sell off its bonds, causing yields to spike and making debt unsustainable. This belief has become an unshakeable dogma, a fiscal straitjacket binding successive chancellors.
Yet, as The Guardian points out, the evidence for this immediate and brutal punishment is remarkably thin. The UK government can borrow over 50 years at some of the lowest rates in its history. The real-world behaviour of markets is far more nuanced than the simplistic vigilante narrative suggests.
This manufactured fear has a very real cost. It has starved the NHS, schools, and transport networks of crucial long-term capital. It has prioritised arbitrary accounting rules over the tangible, human need for functioning public services and modern infrastructure.
Time for a New Economic Reality
The article challenges the new government to break free from this self-imposed prison. The old rules, focused on narrow debt targets, are not fit for purpose in a country facing a profound investment crisis.
A more sophisticated approach is needed—one that distinguishes between borrowing for day-to-day spending and borrowing for productive investment that grows the economy for the future. Building hospitals, funding research, and installing green energy infrastructure are not mere costs; they are assets that generate a return for the nation.
Ultimately, the power of the bond vigilante myth lies in its perpetuation by politicians and commentators. By choosing to stop fearing these imaginary monsters, Britain can finally have an honest debate about the future it wants to build and the smart investment required to get there. The first step is to slay the phantom.
