A spectre is haunting British politics: the bond markets.

Defending Keir Starmer after the disastrous local election results earlier this month, the chancellor, Rachel Reeves, warned that a leadership contest would trigger the wrath of those investors who lend the state money by buying and selling UK government bonds (also known as gilts). The prospect of Andy Burnham winning that contest prompted shriller warnings: the left-leaning contender, after all, had dared to suggest governments should stop “being in hock” to the bond markets.

The bond vigilantes, sober voices tell us, would punish him in the same way they punished Liz Truss’s mini-budget: detecting fiscal irresponsibility, they would sell gilts, thereby increasing government borrowing costs, until he dropped any plans for transformative public investment.

This seems plausible: if you want to borrow, you have to do it on the terms of the creditors who lend it to you. But wholeheartedly accepting this logic turns us into “choiceless democracies”, as the economist Thandika Mkandawire warned, where democratic mandates for change are vetoed by bond investors. Burnham has already this week reasserted his commitment to fiscal rules – a sign of the bond markets’ continued grip on our politics. But there is another way: here is a plan for progressive politicians to stop worrying (too much) about bond vigilantes.

They should start by holding their nerve. Tremors in the bond markets are often driven by global factors. They should also have a clear-eyed understanding of what the bond vigilantes want – and communicate this with the public. The bond vigilantes cheer austerity because their profits are highest when the economy slumps. In this scenario, interest rates are expected to fall and gilt prices increase, pumping returns for investors. Conversely, a mild........

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