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Why UK Borrowing Costs Are Exploding — And Who’s Profiting

Richard J Murphy

118,436 views

UK government borrowing costs are rising fast, and the official explanation does not make sense. Britain is paying far more to borrow than France or Italy, despite having its own currency, a central bank, and no meaningful risk of default.

So what is really going on?

In this video, I argue that the City of London is using the bond market to discipline government and protect wealth. The institutions that own most UK government debt are banks, pension funds, insurance companies, and wealthy investors. Rising interest rates mean rising income for them.

I explain who actually owns UK government debt, who receives the £111 billion a year in interest payments, and why most ordinary households see almost none of that money.

I also look at the role of the Bank of England, quantitative easing, central bank reserve accounts, and why UK rates are so much higher than those in much of Europe.

Most importantly, I explain why the government does not need to accept this situation. There are alternatives. A government that understood how money and central banking really work could take back control of interest rates and stop this ongoing transfer of wealth to the financial sector.

If you want to understand how bond markets really work, and why UK economic policy seems designed to protect wealth before people, this video is for you.

Take a look at our poll below: Post

00:00 — Introduction: why UK borrowing costs are rising sharply
01:20 — Comparing UK borrowing costs with France and Italy
02:40 — Why official GDP and debt figures are misleading
04:30 — Who actually owns UK government debt?
06:15 — Overseas investors and confidence in the UK economy
07:40 — The role of the Bank of England and commercial banks
09:15 — Pension funds, insurance companies, and dependence on gilts
10:40 — How interest payments transfer wealth to the richest households
12:20 — Bond markets, “bond vigilantes,” and pressure on governments
14:00 — Why the City of London benefits from high interest rates
15:30 — Taking back control of interest rates and Bank of England policy
17:10 — Cutting reserve account interest and challenging City power
18:20 — Conclusion: government power, poverty, and the politics of debt

TRANSCRIPT
A transcript for this video is available at: https://www.taxresearch.org.uk

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ABOUT RICHARD MURPHY
Richard Murphy is Emeritus Professor of Accounting Practice at Sheffield University Management School. He is director of Tax Research LLP and the author of the Funding the Future blog. His best-known book is ‘The Joy of Tax’.

This video was edited by Thomas Murphy.

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20 Comments

@godot-whatyouvebeenwaitingfor 4 months ago

I worked at a UK car manufacturer in the 1970's. The cars we made cost far more to buy in the UK than when sold into Europe. I asked why and my manager replied "Because the market stands it..." in other words we pay more because we are stupid enough to do so.

@mohammedakhmed6213 4 months ago

The only conclusion to draw here is that the system based on Interest previously known as Usuary is the real problem. Any financial system based on Usuary will transfer wealth from us to the few no matter what the Interest rate is.

Great minds throughout history from Aristotle, Jesus, Prophet Muhammad, more recently Karl Marx and Richard's favorite economist John Maynard Keynes have spoken against Interest in the strongest terms.

To truly liberate the people we need a system that doesn't work on Interest.

The modern system is particularly parasitic in that the banks simply print the money they borrow to us as mortgages, car loans etc. They add Interest to it. This enslaves us for most of our lives and we have to work hard to give value to that money that was simply printed out of thin air.

@David-r8x1j 4 months ago

Dear richard, any uk goverment can have any policies it wishes. But When you ask private investers to buy your bonds, they have to judge risk. (So when your policies seem to be against business / insentervis not working) Hence the increased percentage points paid.

@OnlineEnglish-wl5rp 4 months ago

Excellent explanation

@DavidHowell-b5w 4 months ago

If only successive British Governments had used North Sea oil and gas resources to build-up massive sovereign wealth funds, the UK wouldn't be in hock to the bond markets.

Norway’s US$2 trillion oil fund, the largest of its kind, generated an annual profit of about US$248 billion last year.

@sebastianbywater2445 4 months ago

There is merit in the old adage “neither a borrower nor a lender be”
When you borrow it has to be on the terms of the lender. Simply employing quantitative easing is borrowing off the whole economy.

@elrig9573 4 months ago (edited)

Government-approved rent seeking bleeds the UK dry. That entire activity produces zero wealth.

@timmasonguitar 4 months ago

While the very wealthy own our media, they will manipulate what we are meant to think to their own advantage.

@Herblay63 4 months ago (edited)

Many people in the private sector have no choice but to use private pension providers as part of their occupational schemes. They are now being framed as “benefitting” from bond market movements and therefore fair targets for tax or policy changes, on the assumption that they are broadly wealthy. That assumption doesn’t reflect the reality for a large share of middle-income savers.
At the same time, around 9 million public sector workers are in defined benefit schemes that are largely unfunded in the sense that they are paid from current taxation rather than invested pots. Those liabilities sit with the taxpayer, but they are often treated differently in political discussions and are not exposed to the same kind of scrutiny or reform proposals.
The result is a perception of uneven treatment between private and public sector pension provision, which raises legitimate questions about fairness and consistency in policy design.

@Truthinshredding1 4 months ago

It turns out The City within the city holds us to ransom... Well who knew the self serving occupants are not philanthropists.

@johnturner502 4 months ago

Great big pile of crap 💩 love it Richard ❤

@nickVandall537 2 months ago

Unless I am not mistaken, the UK defaulted on a loan from the US following the first world war in 1934, so we do not have an entirely clean sheet at repaying debt.

@silviu.pădure 4 months ago

Well done Richard 👍🏼
Really well explained. 💚

@helenheenan3447 4 months ago

We are being played. Are we going to be fooled yet again? Time to call out the bullshit. Thank you Richard for speaking truth to power.

@mikesax 4 months ago

Another very good expose. Thank you.

@BaddeJimme 4 months ago

I would question the importance of credit entirely. Cheap credit just drives up the cost of real estate and the viability of any kind of productive enterprise doesn't change much. It also becomes harder to start a business with your own money, so we see everything owned by corporations.

@mcdoodlematush363 2 months ago

Your solutions in tackleing this inequality between the City and mr&mrs joe consumer make perfect sense, that big gambling den of the london stock exchange needs overhauling also!

@gordonwilson1631 4 months ago

Richard your analysis is always spot on. Good to see you at the Scottish Economics Festival.
We need more public and town hall meetings; ie more democratic discussions.
I attended a Bank of England Citizens Forum meeting expecting discussion. It was a tightly structured and run meeting with their onus definitely on “we can’t afford the things we need.”
I would call that political.
Bad. Worse than bad.

@dandmharrison5364 4 months ago

The City of London Charter needs a deep review.

@ChrisLee-yr7tz 4 months ago

We don't live in a bubble though Richard. If the Gov't monetises all it's debt we will have high inflation which in turn devalues GBP leading to us importing even more inflation.