Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Marine Talks Money Market Rap, where we talk about the biggest moves in markets this weekend, what is driving them. I'm marin someums that we're better at large for Bloomberg UK Wealth.
And I'm joined Stepead, senior reporters of Bloomberg and author of the Money Is Still News Later. I was just carried a week because this is an emergency podcast.
It's not an emergency podcast. There's a regular podcast that's done slightly more quickly than usual. That's spoiling all right now coming on. There's a lot going on. And we are speaking on the thirteenth of May, mid afternoon. And normally I don't bother telling people exactly when we're speaking, but I'm telling them today because there is a lot
going on. We're just sitting here are we were waiting for a resignation from Gastarma or a mention of a resignation or a possibility of resignation, And at the moment we are hearing that possibly he might denounce a possible resignation tomorrow or something like that, or maybe next week, or maybe in a month, for maybe in two.
Months, what I've heard is the way Streeton is considered in resigning tomorrow and then launching leadership battle. Just to be very clear and maybe completely wrong. Yet I'm not a political expect but I don't think your Stamma's ever going to resign as involuntarily or I think.
Giving as I read them, by this morning, he's given giving all the kids of great lessons and resilience and him are finally finding out what he's good at the face of adversity. Ghostmer.
They also of trying to make this sort of like a big thing of him being ruthless and then the surprise when he is actually literally ruthless in terms of protecting his own possession.
But yes, he's not going to go by himself, probably not, and even if he did, political uncertainty isn't going anywhere because you knows who comes next, and if it ends up with the party being shoved further left, even further left than the bone market is not going to like that either. So it's hard to see how his resignation or his forced resignation anyway would improve matters.
I mean, not from the blind market's point of view. It depends on I mean, I think that people object to this because you know, they think, oh gosh, it's more infighting. But the end of the day, the country has actually given its verdict quite strongly and the local election, And if I'm onre Ines Sad, I don't really have a big issue with parties changing leaders in the middle of the game if it is clear that the population
is not happy with the way things are going. Yeah, and I don't think we need to necessarily can have a general election that gave them a mind date. But yes, so we've streeting the candidates so far that we're aware of us streeting possibly Angela Ray and are A those she seems to be falling in behind Andy Burnham. So
basically that's it. You get Andy Burnham, who isn't an MP, but they're all trying to find some convoluted way to let him stand and streeting and streeting is regarded has been on the right of the Labor Party to most listeners who may have a more kind of neutral political perspective. That doesn't mean his right wing. It just means that he's less addicted to spend and than the people.
It's definitely a little bit more pro market. He's being more pro market on public services. You know, he's been talking about using the private sector in the NHS. He's a little bit less pro relentless expansion of welfare than some other people, a little bit more more hardline or crime there. He's kind of hiny bit more pro business. You know, you could call him slightly right of the rest of the Labor Party.
Yeah, he still believes in a decent sized state by he's not going to set there and go Yeah, the Boyd market, you know, whatever that can go away. You know, somebody who actually understands roughly how things work. Andy Bondum clearly keeps sort of trying to allude to a way to get around the Boyd market. It's clearly aware that it matters, but it's not clear I would say from what he says or from what his supports or say, particularly that they really get what it's for or you know,
why it's there or why it's a constraint. And I think that's something that can make the obviously will make the gelt's market can of you know, worry.
Yeah, and we awould be very clear on what's going on here already, and the UK guilt market is there's lots of talk about, oh, maybe our debt to GDP races aren't on that bad relative to other people, and you know, maybe there's stability ahead, et cetera, et cetera. But you can't get away from the fact that net public debt to GDP is pushing one hundred percent in
the UK. You can't get away from the fact that Rachel Raves has pushed up spending massively since you got in both on current spending and what we might call or not call the investment spending.
And there is the tax take that's also shot of that is keeping that in check. It's not careful.
So you know, there is there is a reason why UK debt is priced at a much higher level with a higher yield than other debt inside the G seven what sixty plus basis points above everybody else. And the reason for that is that we have horrible debt levels and absolutely no expectation in the minds of most people that anything is going to change.
Yeah, and also we have consistently too high inflation, which is basically because the same in friendship part Liberal and keeps pointing that we basically ration every part of the economy that we need to grow without inflation.
And this debt level is hideous for public spending. So at the beginning of the pandemic, we were spending well under five percent of government spending was on debt interest and last year was eight percent. And now it's going to be significantly higher than keeps going up and up and up. When you're suddenly spending ten percent of government spending is on interest payments alone, you know you're in trouble.
Yeah, it's not sustainable, and so yeah, you can see why. So I think the main reason the guilt market is a bit more worried about the politics than it might have been is because of this idea that they may throw what little fiscal caution they've got to the wins. And as far as I can see, the other problem is that whether or not, but we don't know that
anyone's going to stand in challenge Starmer. But if street Thing does it, there's already talk from the left of the party that, well, if he if he gets into powerble one of them said, we'll kick him out faster than they get rid of his trust. And you're like, okay, So it's not even as if the next leader is necessarily the final leader for this particular parliament. I get why guilt markets are at the moment unsettled rather than panicing,
and we don't. I think it's really important to emphasize that this is not like twenty twenty two in the Liz Trust situation, because that was a very different set of circumstances and you don't have the same level of instability and leverage that creates a kind of doom loop. But in some ways that's worse because actually what we're getting now is just a repricing that says that well, cable Britain is really kind of unreliable. We're a bit worried about. It's not so much achieving. It's not its
capacity to repays, it's the desire. There are ways, and I'm certainly not the first person to say this, but there are ways that this does echo the Jim Callahan labor government of the nineteen seventies, which is a group of people refusing to confront reality with that it was the IMF that created the external shock that gave Jim Callahan the permission to stand up in front of his
party and say, look, you get a grip. We can't spend money the way we've been spending it, and we obviously still get kicked to it of the next election, and perhaps we need something similar to some kind of market I guess kilt market strike or an FX. I don't like using the what crisis being a pound falling a lot to make people wake up and realize act, you know, we need a change of direction. And that's regardless of who they put in at the top.
It is you here. There's more and more john people saying well, you can need an existential crisis to help it put itself together. It was not going to just happen. Something horrible has to happen before this ridiculous grubbling stops and things change, which.
Is unfortunate, but yeah, I mean, I mean that's it. Crises create the opportunity to change things, and I guess they always do. It's very rarely see proper change happen in the absence, say a crisis, certainly, you know, and in our history and also the history of Europe more widely. Maybe that's the by signal, you know, whenever everything goes horribly pair shaped.
I don't know, wait for the crisis. Wait for the crisis. The crisis be the catalyst. Yeah, Okay, and it's not that far away. One would guess at this right.
Well, you got hope, So it would be nice to get it all on before we have another partly in Power, an.
Entire podcast based on the idea that the best possible outcome is a full crisis.
Yeah, I always saw it's how to Really, I'd say a thing overcome is just kind of lumbered in along the way that we've been going.
That can't go on. And definitely you can't go on with this, you know, anti growth stuff, and definitely at some point something has to change and at some point the UK has to be let loose to grow again, and all the wonderful things that we often talk about about the UK. You know, there's this great base that we have, our amazing technology sector, astonishing ability to innovate, our great education sector, the factors we've talked about a couple of times recently, the very high levels of savings
that the UK population has, et cetera. We are, we are ready to go, if only we're going to have a politician who could put in place the policies to allow the UK to succeed. Let's not talk ourselves around in circles to get up so we're just going to have to leave it there before we upset ourselves. Right now, the best we can hope for is the kind of crisis that lets us restart everything.
Yeah.
Control, Yeah, And right now, the next few weeks we don't see any particularly good outcomes, and nor do we see any particularly good candidates. No, but we have all learnt about how amazingly resilient caseddarmor is, and that's something that is something. Thanks for listening to this week's Marin Talks Money Debrief.
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