The UK is going through a sovereign debt crisis

Editorial: The underlying reasons for the incipient UK sovereign debt crisis are quite large enough to be perfectly apparent

(Dave Brown)

It gets worse. Though as yet undeclared and unacknowledged by ministers or the Bank of England, the United Kingdom is going through a sovereign debt crisis of the kind experienced by the likes of Greece, Portugal and Italy around a decade ago.

The collapsing value of British government debt, gilts, is affecting the banks and other financial institutions that hold these rapidly devaluing assets. The Bank of England has had to step in, buy the assets and generally ensure the banks can still lend into the economy and remain solvent. Rarely can an advanced economy have had to pay such a heavy price for the arrogance of one man – but Kwasi Kwarteng’s refusal to listen to civil service advice or even cost his own policies has resulted in a crisis and talk of an IMF rescue.

And it is not even one week since Mr Kwarteng, presumably with the full authority of Liz Truss, tied sterling to a boulder, chucked it in a lake and declared “a new era for Britain”. Well, he was right about the last bit. “Mini-Budget” seems an inadequate word to attach to the macro-crisis he has triggered with his reckless unfunded tax cuts.