Can it get any worse? Well, of course it can. The Bank of England’s Monetary Policy Committee is almost honour-bound to raise interest rates next week to restore its damaged credibility and to show that it is not just the City branch of the Treasury. Further rises in Bank Rate, perhaps past 3 per cent, are widely anticipated, as the market considers the daunting task of raising another £100bn for fuel subsidies on top of a deficit which already looked a stretch. It will require determination to reassure foreign investors, and imagination to encourage the buyers in.
The answer to a crisis of similar magnitude in the last century was War Loan, a fund-raising of a size that dwarfed everything else in the market. Co-incidentally, the yield on long-dated UK securities is today close to the 3 and a half per cent that War Loan was reset at in 1932, and an appeal to patriotic duty with launch of a bond as a memorial to Queen Elizabeth might surprise us all. National Savings is a (rare) example of a well-functioning government department, and in the past we have seen the power of tax-free retail offers to raise serious money.
