Most Conservative Party candidates would borrow more than planned under the premiership of Boris Johnson. Given the pressure on government budgets around the world, that is worrying
than a decade after the Conservatives declared Britain to be on the brink of a bond-market crisis, many of the candidates to lead the party—and therefore the country—are promising to dole out plenty of cash. Tom Tugendhat wants to reverse a recent increase in national insurance, a payroll tax. Liz Truss wants to do that and cancel a planned rise in corporation tax. Penny Mordaunt,There is still time for candidates to flesh out their plans, and none admits to throwing fiscal caution to the wind.
Inflation eases government-debt burdens, but higher interest rates would mean that governments will have to pay more to borrow. This feed-through from monetary policy to government budgets will happen much faster than markets seem to think, in part because central banks’ vast bond-buying activities have left taxpayers across the rich world unusually. Britain is no exception.
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