Public Sector Draining The Life Out of The Economy

 

The annual average regular earnings growth was 6.3% for the public sector but just 2.9% for the private sector. 

UK gilts this morning: 10-years hovering around 5.4%, 30-years just shy of 6%. 

This is not sustainable! 

Yields Highest Since Records Began

 

On 9 September 2026, UK short-dated gilt yields rose to a one-week high after oil prices climbed above $100 a barrel for the first time in six weeks, reigniting inflation concerns.

Two-year gilt yields reached about 4.629% (up more than 3 basis points), their highest since 2 September (when they hit a five-month high of 4.691%). Five-year yields peaked near 4.727% (also up ~3 bps), the highest since the previous week’s three-year high of 4.785%. Longer-dated yields, including the 10-year (around 5.19–5.21%), edged higher as well amid increased pricing of potential Bank of England rate hikes later in the year.

This follows Tuesday’s (8 September) syndication of £4.25 billion of 30-year gilts, sold at a yield of 5.8168% (or ~5.817%). That marked the UK’s highest borrowing cost on comparable 30-year issuance since at least 1998 (when the Debt Management Office was established), surpassing the prior record of 5.79% from a May 1998 auction. Demand was strong (orders exceeded £87 billion), but the elevated yield highlights ongoing pressure on public finances ahead of the new finance minister’s debut budget.

Broader drivers include the global energy price shock (linked to geopolitical tensions), sticky inflation risks that could keep policy tighter for longer, and elevated term premia/fiscal concerns. Markets have been pricing a higher chance of BoE hikes (e.g., ~70% probability of one by November in some snapshots), even as economists largely do not expect an immediate move.

The Consequences of High Taxes and Socialism

 

Hedge fund titan Chris Rokos to leave the UK for Greece, the latest exit by one of the country’s top taxpayers and biggest names in finance. He ranked 3rd in the Sunday Times’ latest annual list of top tax payers, with a bill of £330m.

Gilt Yields Explained

UK Bond Yields Spike

 

UK gilt (government bond) markets are in a sharp sell-off on 1 September 2026, with yields rising to multi-year or multi-decade highs amid a global bond market move driven by renewed Middle East (Iran-related) tensions, higher oil prices, and reignited inflation fears.

Key yields (approximate levels as of early/mid-session 1 September)

• 10-year gilt: Around 5.23–5.25% (up ~7–11 basis points on the day), the highest since June 2008.
• 2-year: Around 4.51–4.59% (near recent highs).
• 20-year: Around 5.82%.
• 30-year: Around 5.89–5.90% (up ~10–12 bps), the highest since around March 1998.

Longer-dated gilts have been particularly hard-hit. Nearly all conventional gilts saw yields rise. The market was also catching up after the UK public holiday on Monday.

Drivers

• Escalating Middle East hostilities and higher oil prices (Brent rising) have revived concerns about inflation persistence and potential second-round effects.
• Broader global bond sell-off, with yields rising elsewhere (including Japan and the US).
• Markets pricing in roughly 30–32 basis points of Bank of England tightening by year-end (e.g., a November hike seen as likely in some pricing), despite the BoE holding Bank Rate at 3.75% in its July decision.
• Domestic factors include rising shop-price inflation and ongoing fiscal/borrowing concerns ahead of the Budget under the current government (references to PM Burnham and Chancellor Healey appear in coverage). Quantitative tightening (gilt sales from the Asset Purchase Facility) continues in the background.

Broader implications

Higher yields mean higher UK government borrowing costs. Gilt prices have fallen correspondingly (yields and prices move inversely). Some analysts note that elevated yields may already price in a fair amount of inflation and fiscal risk, potentially limiting further sharp moves, though the situation remains sensitive to oil prices, geopolitical developments, and upcoming BoE decisions (next meeting mid-September).

Overall, the gilt market is under clear pressure from external inflation risks and a shift toward higher-for-longer rate expectations, rather than purely domestic issues. 

UK Less Investable Than Venezuela

Public Sector Is Killing The Private Sector

 

Private sector pay up 2.8% public sector up 6.1%.

This is of course unsustainable, the public sector is killing the private sector that funds it! 

Regular wage growth in the three months to June 2026 was 3.5% excluding bonuses, up on the previous period.

Including bonuses the rate was 4.1%, down from the previous period.

Read the release ➡ https://t.co/8FKHMf2iHI pic.twitter.com/FyDXTJyGTT

— Office for National Statistics (ONS) (@ONS) August 18, 2026

ONS UK labour market data from August 2026, where unemployment held steady at 4.9% instead of dropping to the expected 4.8%.

Julian Jessop, at the Institute of Economic Affairs, described the latest jobs figures as “dire”.  

He said: “The unemployment rate remains stubbornly high, with a big jump in the single month figure for June.”

Budget Day 28 October

 

Healey's first budget will be on 28 October....unless Burnham calls a snap election first!

Riddle Me This, Riddle Me That - House Prices Collapse

 

When is a house price collapse, not a house price collapse?

When it is a "down valuation"! 

  

'Down valuation' phenomenon happening at 'scale not seen before' - and it's threatening house sales https://t.co/dekHJNk9Q6

— Sky News (@SkyNews) July 1, 2026

Stocks and Shares ISAs To Be Taxed at 22%

 

The government has announced that interest earned from uninvested cash balances held within Stocks and Shares ISAs will be taxed at 22% tax (they were tax free), effective April 2027. 

Reeves' parting gift! 

Frontrunners For Chancellor

• Ed Miliband: zero private sector economics or financial experience. 

•  Wes Streeting: zero private sector economics or financial experience. 

• Shabana Mahmood: zero private sector economics or financial experience.

The country is truly fucked! 

Bank of England Holds Rates at 3.75%

 

Rates held, Bank states it is ready to act on inflation; ie it remains a passive observer!

SpaceX World's Largest IPO

 

SpaceX ($SPCX) has gone public, having raised a record $75 billion through its IPO. Reuters reports it is set to begin trading on the Nasdaq stock exchange at $171 per share, rocketing far beyond the expected price of $135. 

Elon Musk is on track to become the world’s first trillionaire.

Britain Outperforms Botswana

OBR Fucks Up Again: UK Borrowing £60 BILLION Higher Than Predicted

 

OBR Blunder of the Century: UK Borrowing £60 BILLION Higher Than Predicted – Useless Forecasters Exposed as Rachel Reeves Squirms
Posted by Ken Frost – The Loanbuster – 27 May 2026

Blimey, what a complete and utter farce!

The Office for Budget Responsibility – those so-called “independent” fiscal geniuses who are supposed to keep the government honest – has cocked it up on an industrial scale yet again. Latest figures reveal UK public sector borrowing is running a staggering £60 BILLION higher than the OBR first forecast just months ago.

£60 billion! That’s not a rounding error. That’s real money. Your money. Taxpayer cash vanishing into the black hole of Labour incompetence while the OBR’s crystal ball merchants scratch their heads and mumble “whoops”.

Rachel Reeves is now under massive pressure as the Chancellor who promised fiscal responsibility is watching her borrowing forecasts explode like a cheap firework. The woman who lectured us all about “tough choices” and “fixing the books” is facing the brutal reality that her entire fiscal strategy was built on sand – and the OBR supplied the dodgy blueprints.

The OBR: Consistently Useless Since Day One

Let’s be crystal clear – this isn’t their first monumental cock-up. The OBR has form for being about as reliable as a chocolate teapot:

• Repeatedly underestimated borrowing under both parties
• Wildly optimistic growth forecasts that never materialise
• Failed to spot the impact of Reeves’s own tax raids and spending sprees
• Now missing £60 billion in a single update – that’s bigger than the entire defence budget

These people are paid handsomely from your taxes to get the numbers right. Instead they produce fantasy spreadsheets that bear no resemblance to reality. Why do we even bother with this quango? It’s nothing more than a fig leaf for whichever government is in power to pretend their plans add up.

The truth is simpler and uglier: Reeves’s £40bn+ tax tsunami, combined with rampant public sector bloat, green energy subsidies, and zero growth, was always going to send borrowing spiralling. The OBR just gave her false comfort and now the chickens are coming home to roost with a £60 billion vengeance.

Real people are paying the price — higher taxes, squeezed services, and a national debt mountain growing faster than ever. Meanwhile, the “independent” experts who got it so badly wrong will probably get another pay rise and a polite “lessons will be learned” memo.

This is what happens when you put political forecasters in charge of fiscal reality. The OBR isn’t independent – it’s institutionalised incompetence. And Reeves, who leaned on their forecasts to justify her raids, now looks completely exposed.

Time for heads to roll. The OBR should be scrapped or properly reformed, and Reeves should be considering her position. Again.

Britain deserves better than this endless cycle of fiscal fairy tales and expensive mistakes.

Amazon Suggested Reads – See Through the Fiscal Lies

• “Government by Fantasy” – how official forecasts fail Britain
• “The Debt Time Bomb” – surviving Labour’s borrowing binge
• “Taxed Into Oblivion” – the true cost of Reevesomics

Ken Frost
Professional Cynic, Chartered Accountant and relentless Loanbuster
www.kenfrost.net – exposing the economic charlatans since 2005