Or to be more precise, she’s perched on "a bed of nitroglycerin". That was the phrase legendary bond investor Bill Gross used in 2010 to describe Britain’s public finances, warning the country was stuck in a "ring of fire" as debt surged and bond investors backed off.
Back then, the Treasury projected the national debt would peak at just 77% of GDP by 2014. Today, under Reeves, it’s brushing 100%. And that nitroglycerin is looking more unstable by the day. The Office for Budget Responsibility (OBR) has just warned that debt is on course to blow past 270% of GDP by 2070. But in truth, it will detonate long before then.
Britain’s public finances are “unsustainable”, says the OBR. The state “cannot afford the array of promises it has made to the public”.
We now have the sixth-highest debt burden in the developed world, and the third-largest budget deficit.
Reeves has boxed herself in. She can’t cut debt. Labour MPs won’t let her cut spending. And more tax hikes will crush growth, which only builds up more debt.
The fiscal explosives are in place. The only question is: what sets them off?
We’ve already seen what a UK debt crisis looks like.
In September 2022, Liz Truss sent markets into meltdown with her unfunded tax cuts. Gilt yields rocketed. Ten-year bond yields surged to 4.681%. That was the panic point.
And right now? We’re almost back there.
As I write this, the 10-year gilt yield stands at 4.636%. We’re just a few fractional percentage points away from Truss-era chaos.
One flicker of market fear and we blow through it.
Yields jumped last week when it looked like Keir Starmer might sack Reeves after Labour’s botched welfare U-turn.
The message from investors was clear: Reeves is the only person in this government of foolswho grasps how fragile our finances really are.
But even with her still in post, the gilt market is jittery. Yields are higher today.
And when Bill Gross made his nitroglycerin warning, they were comfortably under 4%.
We’re not quite in full-blown crisis yet. During the financial crisis in 2007, yields peaked at 5.458%. But we’re heading that way fast. And this time, the fundamentals are worse.
Reeves is in charge of the nitroglycerin. And the clock is ticking. As OBR chief Richard Hughes bluntly puts it: “Public finances are in an unsustainable position.
We face an ageing population, soaring welfare costs, crumbling pensions, rising war spending and a tidal wave of net zero climate commitments. Every pressure is building.
Bond traders are clearly getting edgy. Anything could light the fuse. A Trump victory and tariffs on British steel. A flare-up in Ukraine or the Middle East. A crisis in Taiwan. Or Trump’s latest “big, beautiful” $3.3 trillion borrowing binge.
All of it piles pressure on Reeves.
The odds are that debt bomb probably won’t explode today. But it will at some point. And when it does, we’ll be back in full-blown Calamity Liz Truss crisis mode.
Reeves is the only one with the faintest chance of defusing it. But even if she had the skills – her own party wouldn’t let her. Hold tight.
