Do the financial markets have too much power?

An amorphous body of people has, in effect, overthrown an elected government, writes Hamish McRae

It does not matter that the Tories still have a huge majority in parliament, or that Liz Truss was elected by her party members to be PM (Reuters)

This is power – raw, brutal power. The financial markets have forced the government of the world’s fifth or sixth largest economy to sack its finance minister and will almost certainly force it to sack its prime minister in the coming weeks. It does not matter that the Tories still have a huge majority in parliament, or that Liz Truss was elected by her party members to be PM. The game is over.

We know why. The markets thought that the financial programme of the government was not credible. It involved borrowing a lot more money and doing so without the discipline of having its plans assessed by the watchdog set up to scrutinise them – the Office for Budget Responsibility.

Lending to the government was seen as more risky, and as we all know, borrowers with poor credit ratings have to pay higher interest rates. Bond yields shot up, which had the effect of increasing the cost to all sterling borrowers including UK home-buyers. And that forced the retreat.