Key facts
- Political instability in Westminster has cost UK taxpayers approximately £35 billion in additional debt servicing costs since 2020.
- Allianz Trade's study attributes this premium to uncertainty over tax and spending decisions.
- The UK has had five Prime Ministers since the start of 2022.
- The Liz Truss mini-budget in 2022 led to a significant rise in gilt yields.
- UK government debt interest costs are expected to reach around £110 billion this year.
- Allianz's political fragility index ranks the UK third lowest among eight tracked European countries as of July 2026.
Political instability in Westminster has resulted in significant additional costs for UK taxpayers, estimated at around £35 billion since 2020 due to higher government borrowing premiums. Research by Allianz Trade found that constant uncertainty over tax and spending decisions has led to this "distinct political premium" on UK government debt. The UK has experienced a high turnover of Prime Ministers since 2022, including Boris Johnson, Liz Truss, Rishi Sunak, Sir Keir Starmer, and Andy Burnham, contrasting with Italy's two leaders in the same period.
Major political events, such as the Liz Truss mini-budget in late 2022 which proposed unfunded tax cuts, have directly influenced bond markets. This event alone caused long-term gilt yields to rise by as much as 120 basis points, leading to investors reportedly labeling the UK's situation with a "moron premium." The UK government is expected to pay approximately £110 billion in debt interest this year, nearly double the defense budget and close to annual education spending. Ten-year gilt yields, a benchmark for borrowing costs, have increased from about 3.5% in early 2024 to around 5%.
Commentators attribute the UK's political volatility to factors like slow economic growth and a tendency for parties to oust leaders. Jim O’Neill, economics adviser to Andy Burnham, has urged leaders to look beyond the "Westminster bubble" and social media signals. Other financial institutions have also expressed concerns about the UK's political churn.
Allianz's "political fragility index" highlights the sensitivity of bond markets to political changes across Europe. The UK's score on this index has risen significantly over the past six years, placing it third lowest among eight tracked countries as of July 2026, behind the Netherlands, Belgium, and France. The report suggests the UK's reliance on political majorities that can quickly rewrite budgets contributes to higher gilt premia compared to countries like the Netherlands. Across the tracked European countries, political fragility is estimated to have added 2-5% to annual debt servicing costs. Since the end of quantitative easing in 2022, the cumulative cost for these countries is estimated at 98 billion euros (£83.8bn), with the UK bearing the largest share of approximately 41 billion euros (£35bn) over four years. Allianz economists foresee greater risks for Italy's risk premia due to potential Eurosceptic politics driven by far-right forces.