The UK’s ill-fated flirtation with Trussonomics should stay front of mind for policymakers ahead of the Budget.
- The mini budget set the parameters for UK borrowing and showed the grim outcome of a country losing control of its borrowing costs
- Yet borrowing costs are now higher than they were in the Truss era
- There are a number of important differences between now and then
It is three years since Liz Truss launched her unique brand of economics on the world. The bill for that particular financial experiment came in at around £30bn. It remains one of the reasons Rachel Reeves finds herself in such a tough spot ahead of the November budget.
The Trussonomics era has a lingering impact on both bond markets and the UK economy. It set the parameters for UK borrowing and showed the grim outcome of a country losing control of its borrowing costs. While it has not quite silenced those who believe Reeves should borrow more and hang the consequences, most sensible economists recognise that this is not an option.
Yet borrowing costs are now higher than they were in the Truss era and there is a legitimate question as to why this has not been seen as a crisis in the same way. The 30-year government bond yield stood at 5.5% as at the close on 24 September 2025, after moving as high as 5.7% on 2 September. At the height of the mini-Budget crisis, the 30-year yield was just 5%.
Laith Khalaf, head of investment analysis at AJ Bell says there are a number of reasons for this: during the Truss era, bond spreads moved in a fast and uncontrolled way. “Between 22 and 27 September 2022, the 30-year gilt yield rose by 1.2% in three trading days,” he says, whereas it has taken a year to hit the current highs. In 2022, the move was clearly a direct response to government policy.
At the time, UK bond yields were significantly out of sync with global bond yields “Long-term bond yields are higher not just in the UK, but in the US and Europe too. At the height of the UK gilt crisis in the wake of the mini-Budget, the 30-year UK gilt was trading at 1.2% above the 30-year US bond and 2.9% against the 30-year German bond,” says Khalaf. Today, UK bond yields are moving more or less in line with global bond markets, with many countries facing similar pressures.
Also, the Truss budget had an immediate and significant effect on mortgage market prices. At the moment, gilt weakness is concentrated in longer-dated bonds, whereas the mini budget hit two- and five-year bonds as well, from which the majority of mortgages are priced.
Finally, like or loathe Rachel Reeves, she is pursuing an economically orthodox path, and bond markets recognise that. Global governments are being held on tight reins by the bond vigilantes. There are increasingly few forced buyers of global bonds (such as pension or insurance funds). Most bond buyers have a choice about where to invest, so every country’s bonds – with the possible exception of the US – need to appeal on their own merits. The anniversary of the Trussonomics experiment should provide a firm reminder of why it can’t be repeated.
