Amid continuing bond market disquiet, Kemi Badenoch has accused Keir Starmer and Rachel Reeves of not learning the lessons of Liz Truss’s disastrous 2022 mini-budget. She charges Labour with being afraid to make or implement the hard choices required to bring Britain back from the fiscal brink. “They continue to borrow more and more, unable and unwilling to make the spending cuts needed to balance the books,” she told the Telegraph this weekend.

With the zeal and clarity of the religious convert, Badenoch seems keenly aware of the risks of ignoring the demands — not mere requests — of the markets that underpin government borrowing. As a former member of Liz Truss’s cabinet, perhaps Badenoch has learned from experience. Maybe she now “no longer identifies” as an arsonist, having initially backed the Truss plans that ignited market turmoil and pushed up borrowing costs.

Badenoch’s advice to Labour to pacify the bond markets is simple: cut public spending further. That’s a tough sell for the public, however. After being asked to tighten their belts for the best part of a decade and a half, only 17% of the public would support tax reductions and spending cuts, according to a recent YouGov poll. It’s also rather cakeist advice from Badenoch, mere months after her party claimed victory over forcing Labour to U-turn on its Winter Fuel Allowance cut — worth nearly £1 billion in extra government spending alone.

Such is the iron rule of politics since at least 2010: modest cuts to benefits for the richest generation of pensioners are untouchable, while slashing working-age benefits is deemed both fiscally and morally necessary. Accordingly, Badenoch extended an olive branch, pledging support if the government kept the two-child benefit cap — introduced under David Cameron — to rein in working-age benefit spending.

“I made a straightforward offer: Conservative MPs would give him the numbers in parliament to get the bill through, if the Prime Minister committed to cutting welfare costs, getting people into work, and ruling out further tax rises this autumn. He refused. So instead, we watched as the Government stripped its own legislation of any serious reform,” Badenoch said.

Fully aware that removing the two-child benefit cap divides Labour’s leadership and backbenchers, Badenoch’s offer is steeped in political calculation. It also reveals her persistent confusion between tactics and strategy on public finances — asking for just one more squeeze on public spending to “finish the job.” Where is the acknowledgment that this approach keeps failing us?

Badenoch wouldn’t even need to give up the political theatre to back the kind of reforms Britain needs to grow. The worst housing shortages are in cities — areas almost entirely represented by Labour MPs. Supporting urban housebuilding wouldn’t endanger Tory seats, wouldn’t mean concreting over the countryside, and would help supply British businesses with the workers they need. It’s an open goal — and the party that stands to gain the most is refusing to take the shot.

We are approaching the point where making sweeping changes to the state and the political economy are no longer a choice. As the financier and hedge fund founder Ray Dalio put it recently, the UK is at risk of entering a “debt doom loop” where international capital loses confidence in Britain’s ability to reform and return to growth, undermining certainty in debt repayments. Badenoch is right to hold Labour’s feet to the fire on the public finances, but this is bigger than party politics, and it requires a bigger, more mature response.

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James Sean Dickson is an analyst and journalist who Substacks at Himbonomics.

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