Britain’s debt bombshell: Healey must find a way to cut the nation’s bloated welfare bill, says ALEX BRUMMER

Reality has caught up with Chancellor John Healey after a raft of better output data and some flattering words from the IMF. 

Britain may on paper have a fiscal plan, but markets see it differently.

Surging bond rates, together with indexation of welfare and social security costs, in an inflationary era, mean the nation is running on the spot barely to keep solvent.

The last snapshot of the public finances, ahead of next Thursday’s Budget, is clouded by £10.9billion of interest payments in September: the highest recorded for that month in the UK’s history.

With the national debt now at the £3 trillion mark, and no willpower in this Parliament to tackle bloated welfare costs, the shocking £135billion interest rate bill forecast in the Budget 11 months ago could prove too modest.

Even disciples of John Maynard Keynes, an advocate for public spending in economic downturns, could not think that tipping barrel-loads of taxpayer money into the hands of hedge funds, which dominate bond trading, is justifiable.

It is cash that could fund Heathrow’s new runway, Northern transport links, pharma research and AI innovation.

Inflation continues to run hot. The decision to approve gas production from Jackdaw will not bring energy prices down.

Broker Wood Mackenzie notes that, together with Rosebank – should reports that that project will be rejected prove premature – it will generate £25billion for UK plc, lead to at least 800 new jobs and £20billion of investment.

Market borrowing costs are running ahead of the Bank rate. The key rate has been 3.75 per cent since last December, when it was cut from 4 per cent.

The odds must now be on a quarter-of-a-percentage-point rise in November. Data closely monitored by the Bank of England moved in the wrong direction in September.

Consumer price inflation rose from 3.1 per cent to 3.5 per cent. Core inflation has ticked up, services prices climbed to 3.7 per cent from 3.4 per cent and average wages (before bonuses) increased in a healthier labour market.

Meanwhile, the conflict in the Arabian Gulf moves closer, with British Typhoon fighter jets in the air to help a shaken Saudi Arabia. None of this is ideal for a new Chancellor making his debut.

He can share blame for missed targets on geopolitical strife, but he must recognise that the welfare imbroglio lies at the core of the nation’s problems.

Ashtead breach

Britain has long taken a benign view of takeovers of strategic firms by the Americans. After all, we have been on the same side in most conflicts.

However, Elon Musk’s pause of Starlink satellite signals in Ukraine is a reminder of how stupid it is to sell tech crown jewels, such as UK satellite pioneer Inmarsat.

The latest in danger of falling to a US intruder is Ashtead Technology, where a supine board is embracing a £500million bid from New York private equity outfit Ember. 

Much of the debate surrounding the bid focused on price, with dissident American investor Sun Mountain Partners fearful it is being sold on the cheap.

A more significant objection is that Ashtead is the custodian of significant sensitive tech, including ROVs (remotely operated underwater vehicles) vital to protecting subsea cables, naval repairs and recovery.

The Government has signalled its interest in public control, if not ownership, of vital assets. It should invoke the National Security and Investment Act and immediately refer this deal to the under-used Investment Security Unit.

Pass the port

Two decades ago, this paper fought a lonely campaign against the £2.8billion takeover of Associated British Ports (ABP) by a consortium headed by Goldman Sachs.

ABP is vital to Britain’s commercial infrastructure, controlling 19 ports, including Southampton and the Humber, handling 25 per cent of the UK’s maritime trade.

Control was sold to Canadian pension funds. Now, ABP is on the move again following a reported £10billion offer from Aussie investor IFM.

Pass-the-parcel played among profiteering, financially driven overseas owners is never good for investment.

Think of Thames Water.