For Labour, the comparison is particularly unwelcome because the Government came to power promising to restore economic stability, rebuild confidence and demonstrate that it could be trusted with the nation’s finances.
Andy Burnham speaking at Labour’s conference last week (Image: Getty)
Yet the latest movements in the bond market have raised an awkward question: if borrowing costs are now reaching levels above those seen during the final stages of the Truss era, how different is the current situation really?
There is, of course, a major difference between the two episodes.
The turmoil that followed the 2022 mini-Budget was exceptionally rapid. Markets reacted violently to an unfunded package of tax cuts, sterling fell sharply and gilt yields surged. The Bank of England was forced into an emergency intervention because of concerns about financial stability.
Liz Truss was Prime Minister for only 49 days.
The current crisis has developed in a very different way. It is not the result of one dramatic fiscal announcement. Instead, Britain is dealing with years of accumulated debt, high interest costs, weak growth and a global environment in which investors are demanding higher returns from governments.
That distinction matters.
But it does not make the latest figures any less politically damaging for Labour.
Thirty-year gilt yields moving above 6% have immediately provided ammunition for the opposition. The Government can argue that the rise reflects international pressures, including higher energy prices and inflation concerns. Yet voters may have little interest in the technical explanation if they see the consequences appearing in their own finances.
Higher government borrowing costs ultimately have to be paid for.
And the bill does not disappear.
Liz Truss resigned as Prime Minister after just 49 days (Image: Getty)
Every pound spent servicing government debt is money that cannot simultaneously be spent on hospitals, schools, infrastructure, defence or tax reductions. When borrowing costs rise, the Chancellor’s room for manoeuvre becomes smaller.
That is particularly important for John Healey as he approaches his first Budget.
The Chancellor is entering the fiscal event with public debt close to 94% of GDP, borrowing above previous expectations and markets demanding higher yields. At the same time, the Government has made a series of expensive political commitments.
Andy Burnham has promised a National Care Service.
Labour has discussed greater public ownership.
There are commitments on public-sector pay and investment.
And the Prime Minister has also proposed changing the state pension triple lock, arguing that the reform could help create the financial space necessary for his social care plans.
The political difficulty is obvious.
Labour wants to spend more in order to transform public services while simultaneously insisting that it remains committed to fiscal discipline.
Investors, however, do not judge governments solely on their intentions. They look at whether the numbers add up.
This is where the comparison with Liz Truss becomes politically dangerous.
The Truss Government believed that aggressive tax cuts could stimulate growth and eventually improve the public finances. Markets disagreed. The problem was not simply that taxes were being cut; it was the combination of the scale of the measures, the lack of detailed independent scrutiny at the time and the perception that the Government had lost control of the fiscal narrative.
The result was catastrophic politically.
Truss became synonymous with economic chaos.
Labour spent years using the episode as evidence that the Conservatives could not be trusted with the economy.
Now the party finds itself facing the uncomfortable possibility that voters may begin making a different comparison.
If borrowing costs remain elevated, if taxes continue rising, if economic growth remains weak and if household finances deteriorate, Labour’s claim to economic competence could become much harder to defend.
That does not mean Labour has recreated the Truss crisis.
Far from it.
There has been no equivalent sudden collapse in sterling and no emergency intervention of the same nature as the Bank of England’s 2022 gilt purchases.
But politics is not always about whether two situations are identical.
It is often about perception.
And the perception Labour needs to avoid is that Britain has simply moved from one period of economic instability to another.
The Government has attempted to emphasise positive indicators.
Andy Burnham has pointed towards economic growth and falling borrowing in defending the Government’s record. Ministers have also argued that they inherited difficult conditions from the Conservatives.
There is some political logic to that argument.
Labour did not create Britain’s enormous debt burden overnight. Public debt increased substantially over the past two decades, while the pandemic and energy crisis created enormous additional pressures.
The Government can therefore argue that today’s borrowing costs are partly the consequence of problems that predate Labour.
But voters are likely to judge the government they have in front of them.
That creates a serious challenge for Burnham.
The Prime Minister cannot indefinitely blame his predecessors if his own policies begin to affect household finances. At some point, voters will ask what Labour has actually done with the power it was given.
The same applies to Rachel Reeves and John Healey.
The Chancellor has already had to operate within tight fiscal constraints. If gilt yields rise further, those constraints become tighter still.
There are several possible consequences.
The Government could raise taxes.
It could reduce spending.
It could delay investment.
Or it could borrow more, risking an even stronger reaction from financial markets.
None of these choices is particularly attractive.
Higher taxes could anger workers and businesses.
Spending cuts could undermine Labour’s promise to rebuild public services.
More borrowing could cause investors to demand still higher yields.
And delaying investment could weaken the very growth Labour says is necessary to repair the public finances.
This is why the Budget matters so much.
The Chancellor needs to convince both voters and financial markets that the Government has a credible long-term plan.
That means explaining not only what Labour wants to spend, but how it intends to pay for it.
The pension debate illustrates the political difficulty perfectly.
Burnham wants to reform the triple lock and redirect some of the resulting fiscal savings towards social care. Supporters of the idea argue that the current pension guarantee is becoming increasingly expensive as the population ages.
Opponents argue that pensioners have already faced years of rising costs and that removing the earnings element of the triple lock risks allowing the state pension to fall behind wider living standards.
The debate is therefore not simply about pensions.
It is about what kind of state Labour wants to build and who should pay for it.
The Government’s proposed National Care Service presents another enormous challenge.
The ambition is popular in principle: nobody wants elderly people to lose their homes or life savings because they require care.
But universal services cost money.
If the Government cannot fully fund its promises, it will face accusations that it is offering voters attractive policies without explaining the eventual bill.
That is exactly the type of uncertainty financial markets dislike.
Investors want predictable public finances.
They want confidence that governments will be able to service their debts.
They want evidence that spending commitments are sustainable.
And they want to know what happens if economic conditions deteriorate.
Britain currently faces several risks at once.
Global energy prices remain volatile.
Inflation could prove more persistent than policymakers would like.
Interest rates remain a major concern for households with mortgages and for businesses relying on credit.
Government debt is historically high.
And the population is ageing, increasing pressure on pensions, healthcare and social care.
Against that background, the Government has very little room for error.
This is why the latest gilt movement has caused such political anxiety.
It is not simply a story about bonds.
It is a story about the limits of government.
For years, politicians have promised that Britain can simultaneously reduce taxes, improve public services, increase investment, protect pensions and keep borrowing under control.
The arithmetic eventually catches up.
That is the lesson Labour would be wise to remember from the Truss disaster.
The lesson of 2022 was not merely that one tax-cutting Budget went wrong.
It was that financial markets can impose discipline much faster than politicians expect.
A government can announce its plans in Parliament. Investors can reject them within minutes.
That is why Labour cannot afford to dismiss the current gilt-market pressure as simply another temporary market movement.
Nor can the Government assume that blaming international conditions will be enough.
If other countries are facing the same global pressures but Britain experiences a disproportionate rise in borrowing costs, investors may begin asking whether domestic policy is contributing to the problem.
That is the question Burnham, Reeves and Healey now need to answer.
Have they inherited a fundamentally difficult economic situation?
Yes.
Have global conditions made that situation worse?
Clearly.
But have Labour’s own spending commitments, tax decisions and policy choices made the task harder?
That is the question voters will ultimately decide.
And that brings us back to today’s poll.
Should Labour’s current economic record be judged as worse than Liz Truss’s?
There is a powerful argument that it should not.
The Truss Government created a sudden confidence shock that threatened financial stability and ended a premiership within weeks.
Labour’s problems are more structural and much slower-moving.
But there is another argument.
Truss inherited a difficult economy and made a series of decisions that markets rapidly rejected. Labour inherited a difficult economy and now risks making its own mistakes if it responds to fiscal pressure by continuing to increase the tax burden and expanding spending without sufficient funding.
The consequences could be just as politically damaging, even if the route is different.
For Burnham, this is becoming a defining test.
He has promised an ambitious programme of government, from social care reform to changes in the UK’s relationship with Europe.
But ambition requires money.
And Britain is discovering that money is no longer cheap.
The next Budget will therefore be about much more than individual tax rises or spending announcements.
It will be a test of whether Labour can convince the country that it has learned the lessons of Britain’s recent economic history.
The question for voters is equally straightforward.
Do they believe Burnham, Reeves and Starmer have inherited a poisoned chalice from the Conservatives?
Or do they believe Labour has taken an already difficult situation and made it worse?
Liz Truss’s premiership may have lasted only 49 days, but its political shadow remains remarkably powerful.
If Labour fails to control borrowing, restore confidence and deliver sustainable growth, that shadow could become an increasingly uncomfortable place for Andy Burnham to stand.
So now it is over to you.
Have Andy Burnham, Rachel Reeves and Keir Starmer made a bigger mess of the British economy than Liz Truss?
Vote in the poll and share your view. Is Labour genuinely dealing with problems inherited from the Conservatives and a hostile global economy — or has the new Government made the situation even worse?