The Chancellor is under fire yet again and has been warned by a billionaire hedge fund tycoon that the UK is on track for a “debt death spiral.”
Government borrowing is at its highest level in four years and the Office for National Statistics (ONS) said on Wednesday that December’s public sector currently stands at £17.8 billion.
Billionaire Bridgewater founder Ray Dalio has warned the UK bond market has risen amid government borrowing, whilst the Chief executive of S4 Capital, Sir Martin Sorrell has warned people are “bemused by the Budget.”
Chief executive of S4 Capital, Sir Martin Sorrell, echoed Dalio’s warnings and told the Daily Mail that business leaders confidence has “deteriorated quite seriously.”
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Sir Martin said, “The irony about what’s happened is that before the election, they were doing the smoked salmon and scrambled egg breakfast to get business confidence so they got people onside.
“Since they’ve been in power, they’ve found it more difficult. ‘People were a bit bemused by the Budget.
“We’ve got half the plan – we’ve had to take the unpleasant medicine, increase of taxes – now where’s the growth plan?”
Speaking to the Financial Times Dalio warned, “This looks like a debt death spiral in the making because it will either require more borrowing to service the debt that will have to be serviced, squeeze out other spending, or require more taxes.”
Dalio further warned that the markets are not steady and this “reflects a supply-demand problem” for the bond market.
He said, “Why else would long-term [yields] rise when there’s an easing [of monetary policy], the exchange rate is going down, and the economy is weak?”
Dalio added, “When you get to the point that you have to borrow money to service the debt and interest rates are rising, so that debt service payments rise, so you need to borrow more money to pay them, you’re in what the markets call a death spiral.
“As those risks increase, everybody looks at that need to borrow more money at higher interest, which creates [a] self-reinforcing debt deterioration cycle.”
A Treasury spokesperson said the government’s “commitment to fiscal rules and sound public finances is non-negotiable.”
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