Greater Manchester Mayor Andy Burnham recently launched his byelection campaign in Ashton-in-Makerfield on 22 May 2026. Despite claims from the UK right, appeasing bond markets has actually led to instability, argues Andy Beckett.
Austerity and Its Consequences
Austerity policies have enriched bond traders but impoverished British society and fueled the rise of populism. The question remains: should we continue adhering to their interests?
In an anxious capitalist democracy like Britain, with a history of economic struggles and recurring public debt crises, it may seem obvious that governments must align with market forces. This assumption underpins most debates about Labour and bond markets. Pundits, politicians, and economists agree that any future prime minister must design spending policies acceptable to "the markets." As Paul Mason recently wrote, "Defying the bond market is like trying to defy gravity."
Such reality checks have been delivered to Labour governments since the mid-1970s, when Jim Callaghan's administration agreed to spending cuts for an IMF loan. Even Tony Blair deferred to free-market orthodoxies, telling the 2005 Labour conference, "You might as well debate whether autumn should follow summer."
The Myth of Stability
Viewing capitalism as an unchangeable force underestimates the effort required to sustain this model—conservative think tanks, rightwing campaigns, and corporate lobbying. Free-market fatalism also treats economics as simple laws, rather than a complex, contested science. As Samuel Brittan once said, "All economics is a construct."
The concept of "stability" is particularly constructed. Financial markets define it as a long-serving government controlling spending, debt, and inflation. But this stability can be destabilizing: businesses may take risks expecting bailouts, as banks did after the financial crisis. Stability also means social stability, climate stability, and faith in democracy—all undermined by austerity since 2010.
Labour's Opportunity
Unless Labour adopts a less conventional economic approach, instability will deepen. Investment analyst Cris Sholto Heaton writes in MoneyWeek: "Britain needs pro-growth, pro-business policies with huge investment in infrastructure to address voter anger. Gilt investors seem averse to this, not appreciating that the failing status quo will lead to more populist governments."
Since Margaret Thatcher, UK capitalism has often been short-term compared to Europe and Asia. Persuading financial markets that better-funded government benefits the country is difficult for left-leaning governments. Yet signs suggest Labour may try. Andy Burnham argues the economy is sluggish because people pay too much for essentials from privatized utilities prioritizing profits. His thinking reflects influence from think tanks like Common Wealth.
Keir Starmer's initial economic orthodoxy yielded little gain. Now, with events like the Middle East war, even cautious Chancellor Rachel Reeves sounds bolder: "I will not tolerate anyone exploiting a crisis to make a quick buck." Wes Streeting writes, "The centre-left's task is to ensure markets serve society, not dominate it."
With Tories and Reform UK promising more austerity, a political space opens for Labour, already explored by the Greens. It's too early to say conservative economics is ending, but the mindset is more vulnerable than in years.
