The United Kingdom stands on the precipice of an economic collapse, a crisis that Daniel Hannan, writing in The Telegraph, identifies as inevitable, with June 27, 2025, marking the pivotal moment when the nation's fiscal fate was sealed. On that day, Prime Minister Sir Keir Starmer's retreat from even modest attempts to curb the rise in benefits spending signalled to markets and observers alike that Labour's government lacks the will to restore Britain's budgetary balance. This post explores the factors driving this looming crisis, the political dynamics exacerbating it, and the grim future that awaits if current trends persist.
At the heart of the UK's predicament is an unsustainable welfare state. The British government currently spends £52 billion annually on disability and incapacity benefits, a figure projected to balloon to £70 billion by the end of the current Parliament, even when adjusted for inflation. This escalation is driven by a surge in claims, with 1,000 new Personal Independence Payment (PIP) applications filed daily, potentially adding over a million claimants in just three years. One in ten working-age adults now relies on benefits, a statistic that underscores the growing dependency on state handouts.
This expansion of welfare spending has dire economic consequences. As benefits rise, so too must taxes or borrowing to fund them, crowding out resources for investment and growth. Higher taxes stifle economic dynamism, while increased borrowing inflates the national debt, which already stands at precarious levels. The bond markets, ever vigilant, are beginning to view Britain as the "weakest wildebeest in the herd," a nation vulnerable to a sudden loss of investor confidence. When the bond vigilantes strike, as they did in Greece during the euro crisis, the result could be a catastrophic spike in borrowing costs, rendering debt servicing unsustainable.
The roots of this crisis lie not only in economic mismanagement but in political cowardice and cynicism. Labour's backbenchers, Hannan argues, are driven by a "lowest and most cynical short-termism," prioritising electoral survival over the nation's long-term stability. In urban constituencies, Labour's election strategy hinges on fearmongering, distributing postal votes to welfare claimants while warning of Conservative threats to their benefits. This approach creates a perverse incentive: the more constituents depend on state handouts, the more secure Labour MPs feel in their seats. Yet, this tactic is a Faustian bargain, debilitating recipients, burdening taxpayers, and entrenching a cycle of dependency that undermines the economy.
Labour's inability to reform the welfare system is compounded by internal party dynamics. Starmer, constrained by 400 "standard-issue big-government" MPs loyal to the Corbynite policies that propelled his leadership, has proven incapable of pushing through even modest fiscal restraint. Attempts to reduce winter fuel allowances, cap child benefits, or slow the rise in PIP have been abandoned under pressure from rebellious backbenchers. These MPs, Hannan suggests, are more concerned with avoiding negative headlines than addressing the structural flaws in Britain's finances. Their refusal to act ensures that the welfare state will continue its unchecked growth, pulling the nation closer to economic ruin.
The economic truisms are inescapable: the more generous state benefits become, the more people will claim them, including both domestic residents and mass immigration's newcomers drawn to Britain's welfare system. This dynamic not only strains public finances but also erodes the incentive to work, further weakening the economy's productive capacity. As taxes rise and growth stagnates, the UK becomes increasingly reliant on borrowing, a strategy that can only delay the inevitable. When the bond markets turn, as they did on Greece, the consequences will be swift and brutal: soaring interest rates, a plummeting pound, and a collapse in living standards as salaries and savings lose value and imports become unaffordable luxuries.
Hannan predicts a future where Labour's refusal to reform leads to electoral oblivion. The party's MPs, by opting for short-term political gains over fiscal responsibility, are ensuring their own defeat. When the economic storm breaks, whether in 2026, 2027, or later, Labour will be swept from power, much like Greece's socialist MPs after the euro crisis. Constituents, hammered by the fallout of a devalued currency and eroded savings, will turn on the party that failed to act. Starmer may limp on until the next election, but Labour's fate is sealed, its MPs having "taken the decision to check out" on June 27, 2025.
The coming economic collapse of the UK is not a distant hypothetical but a crisis rooted in clear and present dangers. The unchecked growth of welfare spending, driven by political expediency and a refusal to confront hard truths, is steering the nation toward a fiscal cliff. Labour's backbenchers, paralysed by fear of electoral backlash, have chosen to "pull the sky down on our heads" rather than risk reform. The bond markets, unforgiving in their judgment, will not wait indefinitely. As Hannan warns, all that remains is to "sit back and wait" for the reckoning, a collapse that will reshape Britain's economy and politics for a generation or more.
https://dailysceptic.org/2025/06/29/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."