What the City’s Debt Debate Forgets: Ordinary People Have Savings Too

Strip the veil: what “bond market discipline” really is

For a non-specialist reader, it helps to be precise. Governments borrow by issuing bonds. Investors buy them. If investors begin to doubt that those bonds will be repaid in money of stable value, they demand higher interest. Higher interest raises the government’s costs. Deficits widen. Pressure builds. Eventually, something gives.

The broadsheet tells this story as if markets are the disciplinarian.

They are not. Markets do not wake up one morning and decide to punish responsible governments. They respond, often late and crudely, to governments that have spent years postponing choices, financing promises through borrowing, and signalling that there is no politically credible plan to close the gap. When that avoidance finally becomes visible, markets react.

Calling that reaction “discipline” is a rhetorical manoeuvre. It launders responsibility. It turns prolonged political evasion into apparent inevitability. Markets are not judges. They are mirrors.

Reframing sustainability: not a ratio, a settlement

Debt sustainability is usually framed as a number: debt as a share of national income. Rising projections are treated as proof of failure.

This is the wrong frame.

Debt sustainability is not an accounting threshold. It is a distributional settlement. It answers three questions that cannot be avoided:

• Who pays.
• How visibly.
• And when.

A society can carry high debt if its institutions can raise revenue, restrain spending when necessary, and maintain legitimacy for the bargain. Another society can falter at lower debt if its politics are fractured and its voters no longer believe costs are shared fairly.

The obsession with ratios allows writers to discuss debt without naming whose incomes, savings, or services will absorb the adjustment. That abstraction is not neutral. It is protective.

The postwar lesson the nostalgia leaves out

The broadsheet reaches for reassurance in history, pointing to postwar Britain. Debt fell sharply. The welfare state expanded. The implication is clear: we have done this before.

The fact is true. The lesson drawn from it is not.

This is not an accusation. It is a description. Debt reduction relied on conditions that no longer exist in the same form: capital controls, limited financial mobility, rationing, and a population shaped by wartime consent.

The lesson of the postwar period is not that debt reduction is easy. It is that debt reduction depends on political and institutional conditions modern democracies largely lack.

The fork the broadsheet will not name

There are only two ways democratic states ever manage excessive public debt.

First: explicit adjustment.

This is the honest route. Governments make visible decisions and defend them publicly. Taxes rise where the base actually is. Entitlements are redesigned to reflect demographic reality. Spending priorities are ranked, and some programmes lose. Defence and foreign commitments are aligned with fiscal capacity rather than treated as untouchable symbols.

This route is economically coherent and politically brutal. It produces identifiable losers. That is why it is rare.

Second: covert adjustment.

This is the route chosen when governments want the outcome but cannot survive the vote. It operates through technical mechanisms that function as redistribution: fiscal drag, regulatory pressure on savings, tolerated inflation, and repeated market backstops framed as stability.

The crucial point is this: the covert route is still a choice. It is chosen precisely because it disguises the transfer.

Why “hard fiscal choices” are harder now

Modern welfare states are heavily weighted toward pensions and healthcare, defended by the most reliable voters. Healthcare costs rise with technology and expectation. Political systems are fragmented. Capital and skilled labour have exit options. Regulatory complexity enables quiet burden-shifting.

Above all, trust has eroded.

A contemporary illustration, not a case study

Consider fiscal drag. Tax thresholds are frozen while wages rise. More people pay higher rates without any vote to raise taxes. It is presented as technical housekeeping. In reality, it is one of the most effective tools of covert adjustment available.

The burden is real. The choice is real. Only the language is disguised.

The real crisis is legitimacy, not arithmetic

The developed world is not primarily facing a mathematical problem. It is facing a legitimacy problem. Citizens expect protection and provision. Governments promise both. But they increasingly fund those promises through borrowing and technical manoeuvres rather than honest taxation or explicit trade-offs.

People feel the cost anyway. They are told it is inevitable. They are told it is global. They are told it is the market.

The gap between lived experience and official language is the danger.

The hard conclusion

The broadsheet wants readers to fear markets. That is the wrong fear.

The right fear is that democracies have lost the habit of governing honestly when costs must be allocated. They still tax, borrow, and spend. But when the bill arrives, they prefer stealth to clarity.

There is still time to choose explicit adjustment before covert adjustment hardens into crisis. But that requires something the system resists: admitting trade-offs, naming losers, and defending choices openly.

If that honesty cannot be produced, the endgame is predictable. The system will continue to govern by concealment until a shock governs for it.

When that happens, the broadsheet will call it discipline.

We call it what it is.

A choice deferred until it becomes punishment.