Economic Collapse is Now Inevitable

Economic collapse is now inevitable, says Daniel Hannan in the Telegraph, and he identifies June 27th 2025 as the Ground Zero Day when the future became set in stone:

In backing away from his attempt to slow, however feebly, the rise in benefits spending, Sir Keir Starmer was signalling to the world that Labour would never bring Britain’s budget back into balance.

The storm might break in 2026 or 2027 or even later. Labour politicians will do everything in their power to postpone the reckoning. But debts are not just paper liabilities; they end up being recovered.

We have all just watched a hopeless and hapless PM throw away his majority and, with it, any hope of reform. And the bond vigilantes saw what we saw.

What were Labour’s rebels thinking? Their constituents will be hammered when the money runs out, when salaries and savings lose their value and imports become luxuries. They will be swept from office just as surely as were Greece’s socialist MPs after the euro crisis.

Do they even believe their own claims? Do they truly imagine that they are shielding the vulnerable? Do they picture themselves posed heroically over some wheelchair-bound child, fending off the ghost of Margaret Thatcher?

Hannan reserves his main incredulity for Labour’s backbenchers who are, in his view, apparently incapable of seeing the blindingly obvious but determined to hang on to their seats, with one working-age adult in 10 on benefits and 1,000 new PIP (Personal Independence Payments) applicants every day (that’s over a million in three years by the way):

What we are seeing is the lowest and most cynical short-termism from MPs who want to keep their seats. In parts of urban Britain, Labour’s election strategy involves distributing postal votes to welfare claimants along with the warnings that the Tories are coming for their benefits.

From a purely partisan point of view, it suits Labour MPs to have constituents who claim state handouts. Sure, handouts are debilitating for the recipients and burdensome for the contributors; but the politicians who arrange the transfer often get an electoral reward.

Despite that, Labour MPs are still ensuring their defeat:

What looms in the feverish fears of MPs is having to mount the stage in their local sports centre and make a concession speech.

Yet, paradoxically, they are making their defeat almost certain. The British state spends an unbelievable £52 billion a year on disability and incapacity benefits. According to the DWP, that figure will rise to £70 billion at today’s prices by the end of the present Parliament.

Labour backbenchers would rather pull the sky down on our heads than risk a bad local headline. Labour Whips, knowing that the only thing they have going for them is the split between the two Right-wing parties, will do anything to avoid a similar split on the Left.

Labour is thus incapable of reducing expenditure. If it could not stick to its commitments on reducing the winter fuel allowance, capping child benefit or slowing the rise in PIP, it is plainly not going to attempt a radical overhaul of benefits.

As Hannan points out, there’s an economic truism in the facts that:

The more state benefits rise, the more taxes or borrowing must rise to pay for them, leaving less and less money for investment or growth
The more available state benefits are, the more people will claim them, including both those already here and others from overseas anxious for a slice of the cake on Easy Street

He predicts a future like the one that crippled Greece, triggered by the bond markets turning on Britain as the “weakest wildebeest in the herd”, and the remorseless march to electoral oblivion Labour seems hell-bent on:

Starmer might manage to limp on until the next election, a prisoner of the 400 standard-issue big-government Labour MPs who want him to stick to the Corbynite policies on which he was elected party leader. Either way, Labour itself is finished. Last week will be remembered as the moment when its MPs took the decision to check out.

All we have to do now is sit back and wait. Worth reading in full.