Home » News/Views » Carelessness and contempt

Carelessness and contempt

5 October 2022

The pound has been under strong pressure since the mini budget.

Britain’s finances would have collapsed long ago had Britain’s pension funds failed to provide the government with credit by buying government bonds, known as gilts. Indeed, pension fund savings and the Bank of England have been the only outlets to have consistently provided the government with credit on favourable terms since the 2008 financial collapse.

During the past couple of weeks the government’s contempt towards its two main domestic creditors nearly brought about a new, devastating collapse. 

Since new chancellor Kwasi Kwarteng’s “mini budget” the Bank of England has had to step in to provide credit support to protect the economy from the government itself. At the same time those managers charged with the hard-enough job of running workers’ pension funds have been left “flying blind” by government zealots too arrogant to even consult. 

The consequences of rapid changes in interest rates can be highly technical, but what happened with the mini budget is so simple that any fool should have been able to see it. With investors spooked by the amateurish proposals, interest rates spiked rapidly – faster and higher than at any time in the past three decades, according to the Bloomberg news service.

GCSE economics

When interest rates rise, the value of government gilts falls, and investors start worrying about their investments. This is GCSE economics, knowledge too specialised for our chancellor and prime minister. If rates rise really quickly, investors quickly get really worried – and they ask for their money back.

And that’s precisely what happened. The financial uncertainty generated by the mini budget raised interest rates and led to pension funds facing urgent demands from investors to meet “margin calls” – and having to sell assets at unfavourable prices to meet those call requirements. 

Anyone acquainted with the management of pension funds – but clearly no one in the upper reaches of the government – would have been aware that rapid changes in long-term interest rates due to sudden unsignalled government actions would result in this outcome. At one point, until the Bank of England intervened, it looked like Britain’s capital markets were about to implode, along with the occupational pensions that so many workers rely on. 


The danger has not passed. Britain is now exposed to worldwide markets where the Bank of England cannot rapidly raise the base rate without the economy falling over. So it’s currently a base rate of 2.25 per cent versus inflation at around 12 per cent.

The result is a falling pound (raising the prices of imports) in the complete absence of tactics or strategy to deal with the consequences. And foreign investors rushing to buy up “cheap” British companies.

It cannot be emphasised enough the damage this government and its pipsqueak advisers have inflicted on us. The sheer carelessness and complacency involved shows deep-seated contempt for workers and their pension funds, not to say contempt, too, for the Bank of England.

Time for us to show our contempt for them.