Emma Revell is External Affairs Director at the Centre for Policy Studies.
Politics might be in turmoil, but if there’s one thing you can usually rely on, it’s that the public consider the Conservative Party’s strength to be economic management. When asked by YouGov ‘Which political party would be the best at handling the economy?’, the public responses have put the Tories on top, or joint leaders, in every poll since Labour came into office. Earlier this month, for example, 19 per cent of respondents backed Kemi Badenoch’s party compared to Reform on 11 per cent and Labour on 15 per cent.
Yes, the gap has closed significantly since 2020 – when a combination of Jeremy Corbyn’s ineptitude and the unifying effect of the early days of pandemic uncertainty drove the Tories’ rating up to 47 per cent – but a lead is a lead. Especially given that there are more options to choose from thanks to the surge in support for the Greens and Reform: it’s hard to imagine one party having nearly half the country think it’s best placed to handle anything if we are moving towards a truly multi-party system.
Kemi Badenoch and her team can therefore take a lot of comfort in the fact they’ve maintained a relatively stable lead on the economy. And one of the ways they’ve done this is to take the scale of our debt crisis seriously.
In the wake of last year’s spending review, my colleagues at the Centre for Policy Studies calculated that public spending was on course to reach almost £1.5 trillion in nominal terms by 2028/29 – representing a real-terms increase of 23 per cent on 2019/20. Debt spending accounted for 39 per cent of this increase.
The UK’s debt to GDP ratio is worrying close to 100 per cent – it was previously thought to have breached that terrifying milestone around 2023, but the Office for National Statistics revised down the figures for several years. Not that any policymaker should take comfort in that. The Office for Budget Responsibility has forecast that in 2025-26, debt interest spending will total £111.2 billion. Simply servicing the interest on our debt will account for 8.3 per cent of total public spending, more than the entire sum raised by corporation tax in the same year.
And of course, if the country gets caught up in global instability of some kind – as seems to be happening with alarming frequency at the moment – our growth figures worsen and the outlook darkens, meaning servicing that debt gets even more expensive.
Of course, the Conservative record on this is not exactly spotless, as Shadow Chancellor Mel Stride acknowledged in a speech to our team at the Centre for Policy Studies earlier this week. But he also had a point both that the Tories were struggling to deal with the impact first of the global financial crisis and Labour profligacy, and then of a worldwide pandemic. And he also had a point that Labour have made things far worse.
‘Last week,’ Stride told the audience, ‘you could literally map the fluctuations in yields against the news reports on the latest resignations or rumours of leadership challenges.’ When news broke that Josh Simons was to step down as MP for Makerfield, clearing the way for Andy Burnham to potentially make a return to Westminster and run for Labour leader, the market jumped 18 basis points.
The Conservatives have calculated that if that increase was sustained across the Office for Budget Responsibility’s forecast, it would add nearly £2 billion to annual debt interest spending, costing £5.4 billion cumulatively across the five-year window – or £300 for every working household in this country. ‘Andy Burnham is already costing us all money before the by-election writ has even been served,’ quipped Stride.
Of course, those kind of headline numbers should be taken with a pinch of salt. But it’s still pretty extraordinary that, as Stride also pointed out, Labour have added a quarter of a trillion pounds to the amount that the country will borrow over this Parliament – and that’s if their fiscal forecasts are accurate.
The Conservatives, in a bid to demonstrate they’re serious about restoring fiscal credibility, have come out with a ‘Golden Economic Rule’: a binding commitment that at least half of all savings identified by a future Conservative government will go directly to reducing borrowing. ‘We can’t afford the nice stuff – like tax cuts – unless we also make sure we are balancing the books,’ Stride told a packed audience, ‘Getting debt off our back is central to the vision of a brighter future for our country.’
In short, the message is that while the Tories might have created, or exacerbated, some of of these problems, they’re serious about trying to fix them. Which Labour, it’s clear, are not.
Keir Starmer and Rachel Reeves talk a good game about the bond markets. But they have categorically failed to implement spending restraint, instead smothering businesses with tax hikes and anti-entrepreneurial regulations. They’ve been forced by their own backbenchers to abandon even the most moderate welfare reforms, which would have saved a relatively insignificant amount of money. As a result, 2025/26 – the only full financial year under this Labour administration – saw borrowing increase by £132 billion.
And the rest of them are even worse. Burnham famously proclaimed Britain should no longer be ‘in hock’ to the bond markets. It has been reported those around him believe he will bring the markets ‘to heel’, as though markets are a misbehaving dog and not an independent reflection of investors’ perceptions of our economic performance.
Such is this lack of contact with reality that the International Monetary Fund felt obliged to point out in its annual health check of the UK’s economy that our ‘economic realities’ leave little scope for further tax hikes or new borrowing.
To be fair, Reform – who have been included in YouGov’s trust trackers since May 2025 and who are currently backed by 11 per cent of voters on the economy – have made a similar diagnosis of the problem to the Tories, but have yet to set out any clear fiscal rules they would seek to implement in government. Of course, they have had a ‘Shadow Chancellor’ for less than six months and a general election is still, probably, a few years away. There is plenty of time for these things to develop. But the fact they have set out numerous spending commitments and flip-flopped on others, like the two-child benefit cap, is a reason for markets to treat them cautiously, at least for now.
Of course, you can have the most credible plan to tackle our sky-high borrowing. The problem will come when a future government takes office and is faced with the realities of having to deliver real spending cuts – with all the political backlash that can entail. Given the perilous state of the nation’s finances, we should all wish them luck.