GBTT Weekly Briefing

The most important news of the week is England beating Norway last night 2–1 to secure a place in the World Cup semi-finals.

In less important news, Britain has somehow ordered the full tasting menu: an energy shock from abroad, a domestic economy already wheezing, and a Bank of England preparing to raise rates into both. No substitutions.

Donald Trump declared the Iran ceasefire "over" on Wednesday. Within hours the US had hit ninety targets inside Iran — air defences, radar, missile sites, the Revolutionary Guard's fleet of small boats. Iran hit back at tankers, then at Qatar, Bahrain and Kuwait. Shipping through the Strait of Hormuz ground to a near-halt again. Oil jumped. Then it calmed down. Gilts did not. Ten-year yields touched 4.95% on Wednesday — the highest since 10 June. As I write, developing weekend events include the US striking 140 Iranian military targets overnight as Iran declares the Strait closed again, reinforcing the escalating troubles in the region.

Then Huw Pill went on BBC Walescast and said the quiet part out loud. Asked whether rates need to rise this year, the Bank's chief economist didn't hedge: "The short answer is yes." The economy, he said, has been running hotter than its supply side can sustain. Pill was one of only two MPC members who voted for a hike in June. Seven wanted to hold. The next meeting announcement is 30 July.

But there's a flaw in the plan. Higher rates don't manufacture oil. They don't reopen Hormuz. They don't persuade the Revolutionary Guard to stop attacking oil tankers. What they do is make mortgages dearer, credit scarcer, investment harder. Construction PMI: 38.4 in June. Below 50 means shrinking. This is a long way below it. Britain wants 1.5 million new homes. It is making the financing of building them steadily more expensive. Count Binface would call that insufficiently serious.

Gary Stevenson’s Channel 4 documentary, released last week, was meant to expose the super-rich. Instead, it exposed the dangers of giving a man who confuses QE with government spending an hour of television and no adult supervision. Perhaps we can now retire the wealth-tax debate before Channel 4 commissions a sequel.

Andy Burnham is expected in Downing Street on Monday 20 July as the new Prime Minister. Nigel Farage may soon be fighting Burnham, the bond market and Count Binface for airtime. Burnham promises to be "preventative, not crude" on welfare and pensions. Nice phrase. The Treasury’s answer will be shorter: no..

Mood music is cheap. Government is not.

The OBR's warning is simple: if Britain carries on making the same spending promises without finding the money to pay for them, the national debt keeps rising for decades. In its central projection, debt climbs from around 95% of GDP at the start of the 2030s to roughly 300% by the mid-2070s. In a worse scenario, it rises above 500%. These are not forecasts in the normal sense. They are warning lights showing where current policy leads if governments, of all colours, refuse to change course.

The pressure comes from an ageing population, higher pension costs and ever-rising spending on health and social care. Tax revenues do not keep pace. The gap is filled by borrowing, which pushes up debt interest and leaves less money for everything else. In short, it's not sustainable on any measure.

The OBR says stabilising the debt would require a permanent improvement in the public finances equal to 3.8% of GDP from 2031–32, on top of what is already planned. In today's money, that is around £115bn a year — roughly £4,000 for every household in the country, every year. It would not necessarily arrive as a single bill. It could mean higher taxes, lower spending or more likely both. Delay until the 2050s and the adjustment rises to around 8% of GDP — more than £8,000 per household in today's terms. Waiting is not the painless option. It simply sends a larger bill to the next generation.

Westminster’s reflex is always the same: fiddle the fiscal rule, move the deadline, redefine the debt and conjure up a little more “headroom”. It is accounting theatre. Britain has built a state it cannot afford and lacks the honesty to say who will be made to pay for it.

MPC members do not normally tell BBC Wales exactly what interest rates will do next. Huw Pill did. Asked directly whether rates would need to rise this year, the Bank's chief economist said: "The short answer is yes." That is about as close as a sitting rate-setter gets to pre-announcing a vote outside the Bank's own communications.

It also confirms how split the Committee already is. Pill and fellow external member Megan Greene were the two dissenters in June, both voting for a hike; the other seven preferred to hold. Two votes is not a majority. It is not nothing either.

Markets have already made up their mind about who is winning the argument. Money markets now price roughly a 75% chance of a hike by year-end, and ten-year gilt yields have pushed closer to 4.90%. Whatever the Committee's majority still says in public, the price action is backing the minority.

Sterling hit a one-year high against the euro and its best level against the dollar since 15 June, while the FTSE fell 1.7% on the week despite Friday gains in Vodafone (+12.7%) and easyJet (+14.1%) on deal news. Pill speaks again Monday; Bailey follows at Mansion House Tuesday — expect every word from both read as confirmation or pushback ahead of the 30 July MPC.

Shipping through the Strait has collapsed to a trickle: just five vessels crossed on Wednesday, according to maritime tracker Windward, down from roughly 130 a day before the war began in February. Brent itself has stayed comparatively calm — spiking over 5% intraday Wednesday to a two-week high near $78 before settling at $75.80 by Friday — but that calm is fragile, and it is already feeding into LNG prices just as households absorb July's 13% increase in the energy cap, an increase already baked in before this week's escalation. Cornwall Insight now projects the October–December cap around £1,899, about 2% above July's confirmed £1,862 — a forecast, not an Ofgem number; the regulator doesn't confirm the autumn cap until 26 August, and this week's escalation makes the direction more uncertain, not less. Weekend update: Iran declares the Strait of Hormuz closed. Expect oil prices to spike on Monday.