The Chancellor Who Doesn't Set His Own Rules

On Tuesday morning the yield on the 30-year gilt rose ten basis points to 5.89%, a level last seen in March 1998, when the Chancellor of the day was Gordon Brown, the Bank of England had just been handed its independence, and nobody in Whitehall imagined that three decades later a Labour government would be borrowing at prices last set before most of its backbenchers had a mortgage. The 10-year gilt touched 5.223%, a rate not seen since June 2008 — the month before Lehman Brothers.

Comparisons to the financial crisis are the sort of thing markets do to unsettle a Chancellor a month before his Budget. It is working.

Andy Burnham's government did not do this. Nobody in the Cabinet Room did this. It was done, mostly, by a global bond sell-off over Iranian oil, an American central bank hinting at higher rates, and tech firms competing with sovereign states for long-term debt — the same forces moving yields in Tokyo and Frankfurt this week. To that extent the surge is not a verdict on British competence at all, and the Chancellor's supporters have a case worth taking seriously: fiscal rules exist precisely so that a government's promises survive contact with days like this one, and the last time a Chancellor treated the bond market as an inconvenience rather than a constituency, the result was 2022, a Prime Minister who lasted forty-nine days, and a mortgage-rate shock that outlasted her by two years. Credibility, on this reading, is the price of keeping democratic control, not the enemy of it.

The trouble is what "credibility" now means in practice, which is: John Healey standing at the despatch box committed to fiscal rules he did not write, designed by his predecessor Rachel Reeves, to reassure lenders he will never meet, in a market that moved his own headroom before he had opened his Budget red box. The BBC's own reporting on Tuesday put the arithmetic plainly — the rise in rates could already wipe out half the fiscal headroom forecast against those rules back in March. Healey has not yet delivered a Budget and the market has already spent it for him.

This is where the accountability actually disappears. The rules were sold as guardrails against the markets. In practice they function as a mechanism by which a Chancellor can announce that his hands are tied without ever having to say by whom — a Downing Street spokesperson can insist the government will meet the rules "with a buffer against uncertainty" and be cutting the deficit faster than any other G7 economy, and every word of it can be true, and none of it answers the only question that matters: who decided that a rule written for a different Chancellor's spreadsheet, in a different fiscal year, under different assumptions about Iranian oil and Japanese bond yields, should now determine what a Health Secretary can spend on winter beds. The rule was not legislated by Parliament in any form voters can repeal. It was inherited, like a lease with a rent review clause nobody remembers signing.

There is a precedent for this, and it belongs, appropriately enough, to a Chancellor called Healey. In 1976 Denis Healey turned back at Heathrow airport, mid-flight to an IMF meeting, because sterling was collapsing and he was needed in the Commons to defend the government's borrowing before he had even secured the loan that would save it. That autumn James Callaghan told the Labour conference in Blackpool that the option of spending your way out of a recession "no longer exists," and that in so far as it ever did exist, it worked "by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment." It was, by any reading, one government publicly announcing the transfer of sovereignty over its own economic choices to people who had not stood for election. But it was announced. It was debated on the floor of the House and argued over by ministers who had to look at each other while they did it, and it produced a specific, nameable humiliation that voters could punish at the next election — which they did.

What happens now is quieter than that, and harder to hold to account for exactly that reason. There was no Cabinet argument this week, no speech to a party conference conceding that an option no longer exists. There was a Tuesday morning yield movement and a press spokesperson's line about lockstep and buffers. The sovereignty transfer happened between the market opening and the ten o'clock news, and the government's job was simply to describe it afterwards in language that made it sound like a choice.

Burnham says his government is "grounded in fiscal responsibility," which is the correct translation of a Chancellor who cannot move the headroom he was given and cannot admit that the headroom was never really his to move. The fiscal rules he serves were designed, in the aftermath of 2022, to stop elected politicians frightening the bond market. Nobody thought to design a mechanism that would stop the bond market frightening elected politicians, because nobody employed by the state answers to an electorate for that.

Denis Healey's humiliation had a date, a flight, and a name attached to it, and the voters settled the matter three years later. This one has a basis-point figure and a spokesperson's quote, and there is no one to vote out for it — which is not stability. It is just where the accountability went.