I’m a podcast addict which means that any particular podcast can turn into wallpaper for the chores or the commute. 

So I was happy to be jarred out of my usual state of mild interest by a great episode of The Guardian’s “Today in Focus.” Based on reporting by Josh Halliday and hosted by Helen Pidd, the episode was called, “How Abu Dhabi bought Andy Burnham’s Manchester.” It was the first time I could remember The Guardian digging into “Manchesterism,” touted by new Prime Minister Andy Burnham as a great leap beyond the Starmerism that had sunk the party and much of the country in a slough of resentful despair. 

Halliday and Pidd reported that the Manchester miracle depended on near-giveaways of public land to attract (and subsidise) foreign direct investment from the Gulf billionaire who had also bought the Manchester City Football Club, installed in a new council-built stadium. The Manchester Life development and surrounding regeneration didn’t come from British capital or government. It came from the international tangle pictured below, which retained revenues that the council might have used to fund more infrastructure, including social housing.

This chart was created by former ISRF Fellow Adam Leaver and his co-authors for their ESRC-funded report, “Manchester Off-Shored” (2022), researched and written at the University of Sheffield, and accompanied by a follow-up, “Manchester, the Centripetal City” (2025). This research formed a pillar of Halliday’s reporting. 

It also confirmed something I’ve disliked for many years: British business shows low investment effort, which is then paradoxically coupled with weak government control over public effort—in this case, large-scale affordable housing. Labour follow the Conservatives in failing to steer the private sector towards specific common goods that its elected governments could openly choose. Instead of democratic planning and benefits that are widely shared, Manchesterism sent public funds abroad to do what it should have done itself.

I wrote to Pidd complimenting her on the show, which I said was a happy contrast to The Guardian’s normal coverage of politics. She wrote back asking what I meant by the contrast. I struggled through a reply.

I think most Guardian political coverage has internalised the “no money” theory of politics, which has turned Labour into a version of the Tories. The coverage stays within old conceptual limits, which includes letting British business off the hook even though it has produced the lowest per-worker capital investment rate in the G7. Starmer-Burnham mostly tinker with decrepit, uncompetitive infrastructure while hunting for foreign capital (and tech, like US AI), which produces a politics of deference, weak agency, low state capacity, and managed decline. I haven’t seen much critical / detached coverage of Burnham’s rearranging of the deck chairs (No 10 North, “rebuilding” become “rewiring,” helping Hull by starving TfL, deferring to the bond market with no public investment plan, and shafting higher ed even more than Jo Johnson et al.) 

Your segment with Josh Halliday (with his underlying reporting) was one of the first bits of Guardian news I can remember that detailed the costs to Britain of this dependency model. 

Overkill, I thought, as I sent it. I didn’t really know how to describe the press’s “conceptual limits” without driving people up a wall.

I couldn’t just blurt out, “politics is years or decades behind academia in its thinking. Journalists should stick with academics and not with politicians.” I know they need to maintain party access and speak a language familiar to their readers. And yet these two journalists, Halliday and Pidd, did puncture the surface to tie Manchesterism to public giveaways and influence-peddling.

The implications of the story are large: the need for (1) a public investigation of this mode of development and (2) a different development model that British society controls for its own benefit. Government has to do the first and listen to academia for the second. What do academics do about this without sounding like insufferable snobs?

My opening answer is to show how a given piece of academic research leads directly to a popular public benefit—once explained, developed, and put into practice. This research involves critique but also alternatives. Implementing the Leaver et al. reports could induce councils to control the results of capital expenditure even (or especially) if they combine private with public capital. The result would be attractive social housing that an equally revived city centre would revolve around.

Government has to have the money to do all the things that it needs to do and that are now mostly undone. This issue has been raised directly by the leader of ISRF’s economics project, Daniela Gabor.

Gabor has just published “Against Bond Vigilantes: Reclaiming UK Fiscal Space.” The report calls for public agency over our economic fate based on an accurate (academic) understanding of government’s actual power over bond markets. The publisher is Labour Mainstream, “the home for Labour’s radical realists,” which suggests that people in government might actually read the report and see their potential scope of action expand.  

The report does perhaps the most powerful single thing that academic knowledge does: take a supposedly unchangeable law and show that it can be changed. And also how. 

The alleged law here is that excessive government spending will be punished by vigilant bond traders, who have a devout collective wish for fiscal prudence. When they see too much government spending (on anything—a green electrical grid, social housing in Hull, tax cuts for the rich) they sell the government’s bonds (like Bank of England “gilts”), lowering their price and driving up interest rates (that inverse relation is summarised here). In this narrative, bond traders use market laws to keep governments honest, meaning cutting borrowing and spending to hold down interest rates and borrowing costs. Bond trader prudence forces government prudence; in our age of finance capitalism, finance induces a baseline austerity on public investment.

Gabor transforms two normally background entities into the lead actors in this bedtime story.

1. Bond traders. Traders (as opposed to long-term bond holders), don’t make money from economic growth but from high bond prices and fluctuations.

Gabor explains:

Gilt vigilantes urge austerity because it delivers short-term profits for impatient, price-sensitive gilt investors: gilts generate the strongest returns when economic growth is low. When high public investment accelerates growth and thereby contributes to inflation, investors anticipate higher central bank rates and sell gilts. Lower gilt prices translate into lower returns for impatient, price-sensitive gilt investors. Conversely, interest rate cuts in response to lower growth, itself induced by austerity, increases gilt prices and thus returns for investors. (12)

As a higher share of bond investors treat bonds as tradeable assets rather than as a source of fixed income held patiently to maturity (a bond offers a defined interest payment), more investors look to bonds for a short-term price increase, and that in turn correlates with weak economic conditions that encourage central banks to lower interest rates. Bond traders don’t seek small deficits because they allow low interest rates that lead to high economic growth which in turn benefits the general public. Rather, traders seek small deficits because they allow lowering interest rates that lead to rising bond prices for them. The language of prudence masks their economic self-interest.

2. The Bank of England (BoE). It has autonomy not only from the elected government but also from the Treasury, and some of its opaque actions have cut the government’s fiscal resources.

The standard story is that the BoE sets the bank’s interest rates along with other technical policies to benefit the overall British economy. This sometimes means raising interest rates to slow hiring and the economy when the economy overheats.

When the new government of Tory Prime Minister Liz Truss proposed a “growth plan” based on major tax cuts without revenue sources, the bond market dumped gilts, driving up interest rates a “staggering 150 basis points (1.5%)” in about a week (15). But the BoE effectively endorsed this correction by declining immediate intervention (by buying back gilts). It instead intervened four days later and in a limited way, which effectively allowed interest rates to reset at a higher rate. Truss resigned, and fiscal discipline, in the standard story, was restored.

Gabor unveils three details generally buried beneath the surface of this misleading tale. First, BoE has pursued the most aggressive form of selling of gilts -- a policy known as Active Quantitative Tightening (AQT) since September 2022, selling a total of £129 billion through September 2026. This increased the interest rate at which the government and everyone else borrows by an estimated 0.7% (17).

Second, the BoE declined to keep the losses on some of these sales on its books as “deferred assets,” as is common practice at other central banks. It has instead required the UK Treasury to reimburse it, so that “by April 2026, the Treasury had paid the BoE over £100 bn,” a sum likely to rise to £125 bn for this veiled programme (19). This “transferr[ed] the costs of a financial stability operations to taxpayers” (16).

To put that second sum in perspective, £125 billon could cover the entire UK university system’s aggregate annual deficit (£2.34 billion in 2023-24) for 53 years.

Third, the bond markets’ lack of confidence in the UK’s “fiscal discipline” is more immediately their lack of confidence in the BoE’s bond policies, where aggressive sales have kept gilt yields high and suppressed prices. In response to investor criticism, Gabor writes, “the BoE ceased its regular consultations with market participants” (17). Labour’s interest in government-led rebuilding gets wrongly blamed for a bond vigilantism mainly aimed at the BoE.

Put these hidden elements back in the story and government gains some headroom and agency. The central bank could openly support broad economic development with lower interest rates coupled with other methods of suppressing price inflation. It could also support public explanation, public pedagogy, and popular interest in financial policy.

After such a shift, there would be less suffocation of the social majority that capitalism stopped supporting long ago. As a bonus, there would be less withering contempt from the Financial Times (“Healey fiddles while the UK stagnates”; “The thwarted Budget of a thwarted government”). There would be public understanding of, even popular support for, Bank and Treasury policies that are brought into the open and deliberated democratically, as previously discussed in this space. Bond traders will never love social spending for human development. But they could play a more pro-social role if confronted with stable rules that have public support. 

I hope Mainstream can get the Labour party to read and deliberate “Against Bond Vigilantes.” I am encouraged by this convergence of advanced academic research and party policy debate.