Gary Stevenson has a favourite media moment. In January last year, as UK gilt yields were spiking to levels that very nearly decapitated the Starmer government in the same way the bond markets removed Liz Truss, the Guardian ran a piece mocking him. “YouTube radicals such as Gary Stevenson act as if John Maynard Keynes had never been born,” it read. “‘Without a wealth tax, the UK will soon go bankrupt.’ An unlikely thing to happen in one of the richest countries in the world, with its own money-printing press.”
Ten months later, he notes, the Starmer government had completely abandoned its spending plans, was cutting disability benefits, and was in a state of terror about triggering the doom loop he had described. The Guardian, he observes with some satisfaction, had basically failed to notice. His new YouTube explainer, posted this morning, uses that moment as the entry point for what he describes as the most important economic education he can provide in the run-up to Burnham’s premiership.
What is a bond, actually
His explanation starts from absolute basics. A bond is a loan. The government borrows money – primarily from wealthy individuals and pension funds – and calls those loans bonds. The only practical difference from a regular loan is that bonds can be sold between parties. The UK government currently owes around 100% of GDP – roughly £43,000 for every man, woman and child in the country.
Because most of these loans run for 12-13 years, the government is constantly having to refinance them. Every few months a large repayment falls due, and the government returns to financial markets to borrow the money to pay it off. The interest rate it gets at that refinancing is the crucial variable.
From 2008 to 2022, central bank rates were near zero globally. Wealthy people couldn’t get returns elsewhere, so they lent to governments cheaply – some loans at almost 0% during COVID. Now those loans are coming due, and the government has to refinance them at today’s rates. UK 10-year gilt yields are currently around 4.77%.
The doom loop
The maths is not complicated. If inflation runs at 2% and growth at 1%, the combined “denominator” effect that helps erode debt over time comes to 3%. If the interest rate is 4.77%, the debt is growing faster than the economy can absorb it. That gap – currently around 1.77 percentage points – means the debt stock grows by itself, year on year, through compound interest.
Once bond traders see that trajectory, they start worrying about repayment. Higher worry means higher interest rates demanded. Higher interest rates make the trajectory worse. Which increases worry. Which raises rates further. “High interest rates lead to negative perception of government finances, which leads to even higher interest rates, which leads to even worse perception of government finances,” Stevenson explains. “This has the potential to lead to what is sometimes described in the press as a doom loop.”
This is essentially what happened to Liz Truss. And it is what very nearly happened to Keir Starmer in January 2025, when gilt yields spiked dangerously. The government got lucky with a good inflation print. But the near-miss completely dominated Labour’s subsequent policy choices – the welfare cuts, the fiscal conservatism, the terror of any spending that might unnerve markets. “These guys are basically terrified that anything they might want to do economically will cause a repeat of what happened to Liz Truss and very nearly happened to Starmer,” he says. “This absolutely dominates their economic policy.”
Was it Burnham’s fault?
Stevenson is pointed about the press coverage of gilt movements over the past months, which has frequently attributed bond market volatility to speculation about Burnham’s economic views. “These stories are, if I’m totally honest, basically verging on propaganda.”
His argument is simple. Bond markets globally have been volatile because of the Iran war – and when yields move on a given day in the UK, they move in Germany, France, Italy, the US, Japan and Australia by similar amounts. That is not Burnham. That is the Iran war’s effect on global oil prices, feeding through to inflation uncertainty, feeding through to interest rate uncertainty. “If something happens in Iran and something happens to Andy Burnham, and government bond prices move in every country in the Western world, that’s probably not caused by Andy Burnham.”
The three options – and no fourth one
Here is where Stevenson stops explaining and starts issuing ultimatums. Western governments, including Britain’s, have spent 40 years transferring public assets to the wealthy and replacing public services funded by assets with public services funded by borrowing. The UK government’s share of national wealth has moved from plus 100% of GDP to minus 100% – from owning things to being in debt for everything.
His warning about Elon Musk’s trillionaire fortune is part of the same argument: as private wealth concentrates, public wealth contracts, and governments become increasingly incapable of providing the things their citizens need without borrowing from the very people who own everything.
At the current trajectory, Burnham’s government faces exactly three options. First: significantly increase taxation on the very rich – centimillionaires and billionaires. Second: significantly increase taxes on working people and higher earners. Third: continue the gradual dismantling of the welfare state. “Those are your only three options. There are no other options.” He is explicit that some combination of all three is likely, but that without option one, options two and three become the entire programme.
The idea that wealth taxes will be punished by bond markets he describes as a misconception. Bond markets want stable government finances and the capacity to repay creditors. “If you increase your capability to tax very rich people, that increases your ability to keep inflation low and pay your creditors back.” A government that can demonstrate a credible, long-term revenue base – including from wealth taxation – should be able to borrow more cheaply, not less.
What he wants from Burnham
Stevenson was in Parliament the day before filming, trying to make this argument to politicians. He has backed Burnham publicly, urged people to vote for Labour in Makerfield, and is now working on a documentary and a press campaign with economist Gabriel Zuckman to create political pressure at the precise moment the incoming government is making its foundational choices.
His concern is that Burnham will be “advised that he can get through this with some sort of financial economic jiggery-pokery, whilst that wealth transfer is ongoing. And that will not work.” If Burnham fails on inequality and living standards, Farage wins the next election. If Farage fails on inequality and living standards – which he will, because Reform will not raise taxes on the rich – the next party will be even further right. “I’ve read a lot about history. What is happening now is not very dissimilar from what happened 100 years ago, where inequality grew and grew and the billionaires funded the right-wing of politics to say ‘don’t worry about us, kick the foreigners instead.'”
The slogan is simple: “Tax wealth, not work.” The window, he believes, is narrow. “We might not get a second chance on this.”
You can watch the video below:
2 responses to “Gary Stevenson explains bond markets – and why Burnham faces a binary choice that no financial jiggery-pokery will get around”
-
Yet Richard Murphy has a different view and suggests that gilts are in reality a deposit account because the uk gov is a safe place to store money. He suggests that 20% of gilts are owned by private enterprise, 30% by foreign gov, 30% by pension funds and insurance companies and the remainder by the UK Gov. of the Uk banks share Some of that is the money on deposit lent to them during the GFC. So what is the reality of the situation? Why don’t we buy back the debt through quantitive easing and take any surplus money out of circulation by taxing the wealthy as thats where it always ends up
-
Who manages pension funds and who owns the companies that manage them?
Who owns insurance companies?
And why are we borrowing instead of being a foreign govt that lends?
And how does quantitive easing work out?I’m asking as someone who has a very basic knowledge of economics, but that sounds like the jiggery pokery Gary is in about.
If money was a finite energy, which in essence it is regardless of quantitive easing, and that energy, let’s say Gas, was being diverted en masse to a handful of key points in the world…
What happens in the rest of the world?
And what has happened to that finite source that used to be everywhere, in different amounts, but everyone had some?Further. If that energy is being hoarded, banked, just left to grow without being used whilst everyone and his wife would use it..cannot access it….what happens?
There is no real economy, and there is no real govt apart from the individuals hoarding the energy who are able to dictate how govts should act.
So, no more democracy.
But how does quantitive easing they keep the masses turning on them, as has happened in history?
Create a moral panic, use distraction to divide us so we turn on each other.
In the meantime, buying up all human necessities, water, medicine, land etc to extract as much profit as possible.
So when people are barely surviving in a world of flaunted abundance and have nothing to lose, what then?
Another Gaza to stop the inevitable backlash?And the moral of this tale?
The hoarder of this energy can only hoard because he cannot possibly use all that energy himself. It gives him power, but at what risk and what eventual cost.
But if it was distributed amongst the many, whilst leaving the hoarder with a substantial hoard, that energy goes to work and functions in a myriad of ways.But essentially, keeping a healthy balance that keeps all of us, hoarders included, safe.
-
Leave a Reply