Why debt strategy is taking centre stage in Reeves's 'aggressive' plans

The bond markets, buyers and no less importantly - sellers of government bonds, hang like spectres over this year's budget.

- By Will Hutton

Public debt is economically indispensable: it allows the government to invest in projects that may last decades and smooth the ups and downs of the economic cycle.

But its scale is now enormous. In total, Britain's national debt nearly matches our national output, implying £111bn of annual interest payments - the government spends more only on the NHS, the state pension and education. Making sure markets believe our debt is sound, and the interest secure, is a crucial policy objective.

It is a never-ending challenge. In stark terms, over this financial year, £170bn of government debt has matured or is maturing, all of which has had to be replaced by finding either the same or new buyers of freshly minted debt for another 10 or 20 years. And on top of that, buyers have to be found for up to £150bn of new debt to fund this year's budget deficit.

The scale of the government's annual demand for borrowing dwarfs how much we save annually, so overseas investors increasingly plug the gap - now reaching saturation point. Mark Carney, the former governor of the Bank of England and now the Canadian prime minister, famously declared that, in financial terms, the UK is dependent on the kindness of strangers. He was right.

The days of empire, industrial preeminence and sterling as a reserve currency are long over. Britain is a medium-sized economic power, an island in the North Sea. Nor does our economic performance both absolutely and in relation to others - on growth, inflation and productivity - offer buyers of our debt much reassurance.